Deed of variation

Sw345

Hi all
I instructed my solicitor (10 weeks ago) to carry out a deed of variation to the leasehold flat that I'm purchasing - it's something linked to the ground rent..I done this to cover myself, as at the time they said my lender was not happy and that if I do come to sell the property down the line I might have issues..
During the 10 weeks (and after constant calling them and emails) they've said it's been back and forth between everyone involved and now my bank is all of a sudden happy to offer indemnity instead... which would still leave me in a vulnerable position if I come to sell the property and I've also wasted 10 weeks it seems? 

I'm really in the unknown here as this is the only thing stopping me exchanging contracts..

Any advice please?
TIA

eddddy

I guess the issue is that the ground rent is over £250 per year (or over £1000 in London).


It might help to put this in perspective.

• The current flat owner pays ground rent to their landlord (freeholder)

• The current flat owner wants to sell their flat to you

• The sale has nothing to do with their landlord - the landlord gets no money from the sale, and gets no benefit

But you (via your solicitor and the seller) are saying to that landlord "I'd like to pay you less ground rent please."

So the last 10 weeks has probably been spent trying to persuade the landlord to accept less ground rent. Normally this is achieved by offering the landlord a few thousand pounds.

But I guess the current flat owner and the landlord haven't been able to agree on how many thousand pounds should be paid in exchange for a reduced ground rent.

So indemnity insurance is an alternative.

propertyrental

Why would the freeholder agree to a Deed of Variation? What's in it for him?

And might he not have to offer the same variation to the lease for the other flats in the building? How many? 2? 3? 100?

Sw345

eddddy said:

I guess the issue is that the ground rent is over £250 per year (or over £1000 in London).


It might help to put this in perspective.

• The current flat owner pays ground rent to their landlord (freeholder)

• The current flat owner wants to sell their flat to you

• The sale has nothing to do with their landlord - the landlord gets no money from the sale, and gets no benefit

But you (via your solicitor and the seller) are saying to that landlord "I'd like to pay you less ground rent please."

So the last 10 weeks has probably been spent trying to persuade the landlord to accept less ground rent. Normally this is achieved by offering the landlord a few thousand pounds.

But I guess the current flat owner and the landlord haven't been able to agree on how many thousand pounds should be paid in exchange for a reduced ground rent.

So indemnity insurance is an alternative.

Hey. The ground rent is currently at £250 per year but there is something that states it increases a certain percentage every five years. My solicitor hasn't asked that I pay less.

brainiack

What lender is it out of interest who is willing to accept indemnity insurance? Heard this is less common now (sadly), as if the 'inevitable' leasehold reforms materialise in the coming years then indemnity is a far better way for sellers to resolve this in the intervening period by which time any buyer would be rid of the situation via new legislation.

Gentoo365

propertyrental said:

Why would the freeholder agree to a Deed of Variation? What's in it for him?

If freeholders (often investment vehicles) don't voluntarily ensure the leasehold properties are mortgageable then it is more likely the law will be changed.

Sometimes the deed doesn't even change the financial aspect, just states that the freeholder has to contact the lender if there are missed payments so the lender can pay it (and therefore not risk losing their security).

eddddy

Didn't your solicitor tell you what Deed of Variation they were requesting from the seller's freeholder, 10 weeks ago?

If they didn't tell you, then you should ask them.


And then chase the seller to find out what progress, if any, they have made with their freeholder. For example,

• Has the freeholder said "no"?
• Is the freeholder still considering it?
• Has the freeholder said "yes" - but it's taking a long time?
• Is the delay due to negotiation about money/fees changing hands?
• Or something else?

Contacting the seller (maybe via the estate agent) will be much quicker and more efficient than communicating via solicitors.

Sw345

brainiack said:

What lender is it out of interest who is willing to accept indemnity insurance? Heard this is less common now (sadly), as if the 'inevitable' leasehold reforms materialise in the coming years then indemnity is a far better way for sellers to resolve this in the intervening period by which time any buyer would be rid of the situation via new legislation.

Hey. It is halifax

RHemmings

propertyrental said:

Why would the freeholder agree to a Deed of Variation? What's in it for him?

And might he not have to offer the same variation to the lease for the other flats in the building? How many? 2? 3? 100?

I would assume the few thousands of pounds offered to the freeholder as per @eddddy's post. I'm curious to know what the typical/median rate for that is.

Is there any indication that with proposed changes to leaseholds (not holding my breath for anything groundshaking) that freeholders are more keen than on average to get financial returns for their freeholds at the moment?