Variation of Deed

Baldyman1

Guys ,

I feel 'm maybe being held a s prisoner in my own flat my my freeholder.

I purchased the property in 2018 and Skipton my then and now mortgage lender didn't have an issue with lending me 80% LTV or any issue with ground rent. This has now changed in the industry. 

I have tried over the last 2 years to sell and 2 years ago it was rejected by Natwest as it was over there ground rent threshold of £250 so no sale . This year I have tried to sell again and the same thing has happened with the potential buyer with 2 different lenders .

The only option the lenderers will consider is a variation of deed at an approximate cost of £4000 , the buyer wants me to pay  this in it entirety ! 

So I need some advice please . Do I swallow the cost ( it will go on my new house bottom line ) or do I say no and let the government hopefully change the law on ground rent ? Hopefully capping at 0.01%

Another problem for me could be the ground rent will be reviewed in 2026 and will go up by RPI over the last 10 years . This will increase from it being now £267 to over £450 .

So roll the dice or pay !

HampshireH

Sounds like if you say no then you aren't moving. I guess it will come down to whether moving is a priority for you.

Whatever government is in charge and whatever they do its unlikely to play to your timescales.

If it were me and I wanted to move I would pay it to do so. But if moving isn't a priority for you then stick it out a few more years (but there is no guarentee of 2026 providing the answer you want and implementing it)

anselld

Do a statutory extension to get the rent down to peppercorn, then remarket at higher price to reflect the increased value.
I would not rely on the legislation improving anytime soon.

GDB2222

anselld said:

Do a statutory extension to get the rent down to peppercorn, then remarket at higher price to reflect the increased value.
I would not rely on the legislation improving anytime soon.

With the ground rent soon going up to £450+, would the lease extension not cost much more than £4000? 

eddddy

Baldyman1 said:

The only option the lenderers will consider is a variation of deed at an approximate cost of £4000 ...

Assuming the £4k will bring your ground rent down to zero, as above, £4k sounds cheap.

A statutory lease extension is currently likely to cost much more than that - maybe in the range of £15k to £25k.



But are you absolutely certain that the issue is just the £250+ ground rent? The vast majority of mortgage lenders say they will accept ground rent over £250 with indemnity insurance.

Do you know which 2 lenders your buyer tried?

W0rryW4rt

Hi all

This post is a mirror image of my own situation currently so I wanted to jump on in the hope of some advice (if you don’t mind).

I too tried to sell my leasehold flat last year and the sale fell through due to a slightly nervy first time buyer plus the £255 ground rent. Back then the freeholder said they would consider a deed of variation and it was being priced up. 

Fast forward to now and I have my flat on the market, 3 months into the sales process with mortgage agreed and everything ready for my own purchase and the solicitor has raised an enquiry about the ground rent. This time the freeholder has said no to a deed of variation and made an alternative offer (something including the word ‘disposal’ which even my own solicitor didn’t really know about). Like the original post, I feel absolutely trapped by this issue! Obviously, the alternative may be palatable to them but any ideas on my options if not?

eddddy

W0rryW4rt said:

Fast forward to now and I have my flat on the market, 3 months into the sales process with mortgage agreed and everything ready for my own purchase and the solicitor has raised an enquiry about the ground rent. This time the freeholder has said no to a deed of variation and made an alternative offer (something including the word ‘disposal’ which even my own solicitor didn’t really know about). Like the original post, I feel absolutely trapped by this issue! Obviously, the alternative may be palatable to them but any ideas on my options if not?

If the buyer has a mortgage agreed, presumably the lender is ok with the ground rent - probably with indemnity insurance. If so, the buyer could proceed if they want to.

You should find out more about the 'disposal' comment. 

Baldyman1

Guys thanks for the heads up .

Sale has now been aborted , like I said its not the lender making issues its the buyers solicitor saying the ground rent although not onerous is not far short of it. A review in 2026 at RPI makes it around 450 a year  and in a further 12 years time around 1000 a year.

Maybe there all getting sued by past clients - I'm going down 2 routes here,  possible 3 .

1. Was my solicitor in 2018 when I purchased neglected?  He didn't point this out directly to me in any correspondence. 

2. Lease extension is going to cost around 8 to 10K , the existence lease has 979 years to run.I had a quote.

3. Wait to see if the rent reform bill changes things - yes I know stick my finger in the air and see what way the wind is blowing .

Lease extension could be the way to go here . My quandary is does this make the property more valuable to recoup my expenses? 

eddddy

Baldyman1 said:

2. Lease extension is going to cost around 8 to 10K , the existence lease has 979 years to run.I had a quote.

Who gave you that quote, and what specifically is it for? Did you pay somebody for the quote?

If it's a premium for a Statutory Lease Extension - that sounds very low.

user1977

Baldyman1 said:

1. Was my solicitor in 2018 when I purchased neglected?  He didn't point this out directly to me in any correspondence. 

Why do you say "directly"? What advice did he give you?

It probably wasn't as much of a (talked about) issue, or one which had much effect on marketability, and indexed with RPI is "fairer" than the ones which just get doubled every x years irrespective of what's happened to the real value of money or property prices.

Baldyman1

eddddy said:

Baldyman1 said:

2. Lease extension is going to cost around 8 to 10K , the existence lease has 979 years to run.I had a quote.

Who gave you that quote, and what specifically is it for? Did you pay somebody for the quote?

If it's a premium for a Statutory Lease Extension - that sounds very low.

https://www.lease-advice.org/calculator/

https://www.samconveyancing.co.uk/   

Obviously this is massively subjective.  Value would be 175,000 and lease expires in 973 years . Was a 999 year.
 lease.

Working on 6k plus legals so 8 to 10 k total.