Rent charge on a FREEHOLD property

Ezzbis2023

I am due to exchange in a couple weeks and just found out that the property is on a estate rent charge of £3 per annum. the previous owner owned this property for over 23 years and not known of this nor they ever paid the rentcharge nor it was ever demanded. its now very difficult or impossible for my solicitor to find out who the rentcharge owner is whether they are even alive. I have already been offered mortgage on this. I am just wondering is my mortgage lender Natwest is going to be okay with it? The property is 'absolute freehold' 3 bed house in Bristol. 

njkmr

You can normally get an Indemnity policy to cover this from the seller.
At the end of the day i think they can go back 7 years so 7x 3 = £21 so either way its not a deal breaker.
I think the policy is only about £15-£20 . I had to get one recently selling a property with ground rent of £1 per annum which i even had letter from decades ago saying the landlord/owner of the land would not be collecting it due to cost of collection ,but i still had to get the policy in place for the buyers solicitor..!

propertyrental

I think there must be bigger issues to worry about than a potential bill for 7 years at £3 per year!

If worried, stick £21 into a savings account........

Ezzbis2023

Thanks both, could i just assume that NatWest will go ahead with issuing the fund without any problem providing that there is a indemnity insurance in place? the rent charge will completely be surrendered in 2037 so approx in 13 years? 

eddddy

This might be a much bigger issue than you think. Your solicitor needs to check the rentcharge deed.


Here's a warning from a solicitor's website:

Why do rentcharges matter?

Rentcharges matter because although the rents payable are generally very small, there can be serious implications if they are not paid in full. 

....

Many rentcharges reserve a contractual right of re-entry exercisable on non-payment of rent, effectively enabling the rentholder to forfeit the estate of the owner of the charged land.

Link: https://www.hilldickinson.com/insights/articles/rentcharges-big-trouble-over-small-sums

  Another solicitor says:

Be Aware of Rentcharges

The amounts involved may be very small, but the extent of the Rentcharge Owner’s rights of enforcement might shock a Buyer.
...

I know a rentcharge exists on my property but nobody collects it – can I just wait until I receive a letter about it?

No – don’t do that! If you are aware a rentcharge is payable, try and ascertain who it is payable to and try and ensure it is paid whether a demand is received or not. If the charge has not been paid for many years then the safest option, instead of attempting to contact the rentcharge owner, would be to take advice from your solicitor regarding putting in place indemnity insurance to cover any loss suffered by you.

Link: https://curtislaw.co.uk/latest-news/be-aware-of-rentcharges/

   Edit to add....

njkmr said:

I had to get one recently selling a property with ground rent of £1 per annum which i even had letter from decades ago saying the landlord/owner of the land would not be collecting it due to cost of collection ,but i still had to get the policy in place for the buyers solicitor..!

You seem to be talking about ground rent. The OP is talking about a rentcharge - they are very different.

nyermen

Sounds like this has come up late - Assuming the solicitor is acting for the Natwest as well (normal but not always the case), aren’t they obliged to inform them?

Skiddaw1

For what it is worth, we had no difficulty in obtaining a mortgage for our last house, which had a similar issue. Our sellers arranged for an indemnity policy and we did the same for our buyers when we moved (they also had no difficulty in obtaining a mortgage).

user1977

nyermen said:

Sounds like this has come up late - Assuming the solicitor is acting for the Natwest as well (normal but not always the case), aren’t they obliged to inform them?

No need to discuss with the lender if there is going to be adequate indemnity insurance in place.

Ezzbis2023

Skiddaw1 said:

For what it is worth, we had no difficulty in obtaining a mortgage for our last house, which had a similar issue. Our sellers arranged for an indemnity policy and we did the same for our buyers when we moved (they also had no difficulty in obtaining a mortgage).

My Solicitor has also asked seller to provide indemnity insurance to protect me as potential buyer and lender. hopefully that goes smoothly. I am yet to hear from solicitor.  fingers crossed!