Deed of Variation for estate rent charge refused

PurplePow

We're in the process of buying and selling. We live on an estate built in 2019 that has estate management fees, and the house we're buying is very similar, built in 2019 and will have estate management fees once it's handed over.  I'm aware this is known as "fleecehold."

I had done some reading around this, and so I was expecting the issue around the point in the deeds that states if we don't pay the estate rent charge they can posess/enforce a lease on your home.  Our buyers are cash buyers but their solicitors have already raised this and so we're getting a deed of variation sorted on our current property.  It's come up on our onward purchase too, so our solicitor has requested a deed of variation from our vendor's solicitor.

The law firm acting for the group for the house we're purchasing will not agree to a Deed of Variation. Our solicitor is surprised by this and has gone back to our vendors solicitor requesting they ask them why and outlining the issues with mortgage lenders if they refuse this. Our solicitor briefly mentioned an indemnity policy and to see if our mortgage lender would accept that, although advises we don't go down that route and we agree, and it doesn't solve the problem for the future. Houses have been sold and bought on that estate since it was built (we would have been third owners on this particular property) but our solicitor advised mortgage lenders are only just becoming more aware of this.

I'm assuming there's absolutely nothing to stop these management companies refusing to do a deed of variation? With more mortgage lenders now requesting this, I'm assuming houses on that large estate will struggle to sell on or remortgage? We're aware we'll have to walk away from this purchase, it's just quite disappointing, and in all my googling of this I hadn't come across a situation where the Deed of Variation was refused for this situation.

nicmyles

Have you offered them money? There will more than likely be a cash amount they would accept.

RHemmings

nicmyles said:

Have you offered them money? There will more than likely be a cash amount they would accept.

That was my thought too. The management company are probably more concerned about their assets, and the ability to charge the rentcharge is an asset. Are you, OP, making an offer that puts them in at least a good position as they are now? 

GDB2222

RHemmings said:

nicmyles said:

Have you offered them money? There will more than likely be a cash amount they would accept.

That was my thought too. The management company are probably more concerned about their assets, and the ability to charge the rentcharge is an asset. Are you, OP, making an offer that puts them in at least a good position as they are now? 

The estate rent charge is not an asset. It is just a mechanism to make it easier to collect the costs for mowing the grass, etc. 

The OP has not said what the variation is that he wants, but it is usually fairly modest, eg informing the mortgage lender before taking drastic action under the rent charge, so as to give the lender a chance to settle the outstanding bill.   

Personally, I’d only buy a property where the estate management is under the control of the property owners. If that is the case, I don’t understand why there’s any difficulty over a variation?

PurplePow

GDB2222 said:

RHemmings said:

nicmyles said:

Have you offered them money? There will more than likely be a cash amount they would accept.

That was my thought too. The management company are probably more concerned about their assets, and the ability to charge the rentcharge is an asset. Are you, OP, making an offer that puts them in at least a good position as they are now? 

The estate rent charge is not an asset. It is just a mechanism to make it easier to collect the costs for mowing the grass, etc. 

The OP has not said what the variation is that he wants, but it is usually fairly modest, eg informing the mortgage lender before taking drastic action under the rent charge, so as to give the lender a chance to settle the outstanding bill.   

Personally, I’d only buy a property where the estate management is under the control of the property owners. If that is the case, I don’t understand why there’s any difficulty over a variation?

Yes it's a variation that will satisfy the mortgage lenders e.g. informing them before they take action, as at the moment that doesn't exist.  The management company are refusing to do a deed of variation.  Our solicitor has asked their solicitor to push them further on why they won't do this, but ultimately will mean we will have to pull out if they won't.

eddddy

PurplePow said:

Yes it's a variation that will satisfy the mortgage lenders e.g. informing them before they take action, as at the moment that doesn't exist.  The management company are refusing to do a deed of variation.  Our solicitor has asked their solicitor to push them further on why they won't do this, but ultimately will mean we will have to pull out if they won't.

It might be useful to contact the sellers as well - maybe via the estate agent.

And encourage the sellers to contact their management company to ask why they won't sign, and to see if they can put some pressure on the management company.


(Solicitors tend to just send 'bland' emails. The seller might have a phone number for their management company - so they can phone and discuss it.)

RHemmings

GDB2222 said:

RHemmings said:

nicmyles said:

Have you offered them money? There will more than likely be a cash amount they would accept.

That was my thought too. The management company are probably more concerned about their assets, and the ability to charge the rentcharge is an asset. Are you, OP, making an offer that puts them in at least a good position as they are now? 

The estate rent charge is not an asset. It is just a mechanism to make it easier to collect the costs for mowing the grass, etc. 

The OP has not said what the variation is that he wants, but it is usually fairly modest, eg informing the mortgage lender before taking drastic action under the rent charge, so as to give the lender a chance to settle the outstanding bill.   

Personally, I’d only buy a property where the estate management is under the control of the property owners. If that is the case, I don’t understand why there’s any difficulty over a variation?

I looked up the definition of asset and information about rentcharges, and it looks like an asset to me. As it's something of value owned or controlled by someone that provides future value. Even if it only provides a mechanism to be paid for services more easily, that is providing value. 

Whether or not it fits the legal/business definition of an asset, e.g. for accounting purposes, I can't see how that changes the situation that the company are unlikely to voluntarily give up the rentcharge without some renumeration that will put them in same situation. If they do, that's them being generous. 

PurplePow

eddddy said:

PurplePow said:

Yes it's a variation that will satisfy the mortgage lenders e.g. informing them before they take action, as at the moment that doesn't exist.  The management company are refusing to do a deed of variation.  Our solicitor has asked their solicitor to push them further on why they won't do this, but ultimately will mean we will have to pull out if they won't.

It might be useful to contact the sellers as well - maybe via the estate agent.

And encourage the sellers to contact their management company to ask why they won't sign, and to see if they can put some pressure on the management company.


(Solicitors tend to just send 'bland' emails. The seller might have a phone number for their management company - so they can phone and discuss it.)

Good idea - I've emailed the estate agent to check the vendors are aware of the seriousness of this at this point.

PurplePow

Our solicitor has come back to us for the Deed of Variation for the property we're selling, persimmon have said £125 + VAT and that they're seeing a large number of these queries of this type.  So seems quite straight forward with them, if only the vendors management company were the same.

Gentoo365

RHemmings said:

GDB2222 said:

RHemmings said:

nicmyles said:

Have you offered them money? There will more than likely be a cash amount they would accept.

That was my thought too. The management company are probably more concerned about their assets, and the ability to charge the rentcharge is an asset. Are you, OP, making an offer that puts them in at least a good position as they are now? 

The estate rent charge is not an asset. It is just a mechanism to make it easier to collect the costs for mowing the grass, etc. 

The OP has not said what the variation is that he wants, but it is usually fairly modest, eg informing the mortgage lender before taking drastic action under the rent charge, so as to give the lender a chance to settle the outstanding bill.   

Personally, I’d only buy a property where the estate management is under the control of the property owners. If that is the case, I don’t understand why there’s any difficulty over a variation?

I looked up the definition of asset and information about rentcharges, and it looks like an asset to me. As it's something of value owned or controlled by someone that provides future value. Even if it only provides a mechanism to be paid for services more easily, that is providing value. 

Whether or not it fits the legal/business definition of an asset, e.g. for accounting purposes, I can't see how that changes the situation that the company are unlikely to voluntarily give up the rentcharge without some renumeration that will put them in same situation. If they do, that's them being generous. 

On the face of it this 'asset' has no value, and isn't actually being given up.

All that is being requested is that IF the service charge are unpaid THEN rather than them using their legal right to convert to a leasehold after 40 days (without notice) they inform the mortgage company, who then pay the service charge so that their security remains a freehold.

If anything this reduces the likelihood of an unpaid service charge.

km1500

that is interesting I had not heard of that before

what happens when the mortgage is paid off to you know?