Deed of Variation for estate rent charge refused

GDB2222

RHemmings said:

Gentoo365 said:

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.

Other advice is to pay them money for it. It was that advice (posted earlier on) that makes me think the rentcharge has value. Making it easier to collect other moneys is in itself a value. But, that people would be prepared to pay to have it removed is, I personally think, an even clearer indication of value. In the same way that a ransom strip's primary value is that if someone wants to build on the land ransomed by the strip, they need to pay. 

There are are normally two situations:

• The estate management is under the control of the developer still
• It has been devolved to the residents

In either case, the chief need for the rentcharge still subsists, ie the need to be able to rattle sabres so as to collect the fairly small management charge without resorting to the courts. 

If it's the residents in charge, they'll obviously agree to reasonable variations that benefit all the residents. If it's the developers, their primary business is selling houses, not extorting piffling profits from rentcharges, so they want to be seen to act reasonably, and they'll also agree to reasonable variations.

peterhjohnson

PurplePow said:

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.

If the management company is or is controlled by a substantial housebuilder then publicity about their policy might appear to make it difficult for them to sell today's newbuilds? 

BonaDea

This problem might have fallen away now with the last-minute passage of the Leasehold and Freehold Act 2024 before prorogation at the end of last month.  Previously freeholds with estate management charges in arrears of more than 40 days could be forfeited under the Property Act of 2025, but the new L & F Act 2024 abolishes that and says instead that the Sec of State will regulate what the penalty for arrears should be (and it's almost certain to be a lot more reasonable than forfeiture!).  The section of the Act dealing with rent charges comes into effect on 24 July 2024, so after that date, rent charges won't be governed by the Property Act 2025.  However the Sec of State obviously can't regulate until after the election and it's likely that the details of how arrears will be dealt with won't be tied down until 2025-26.  Please note I'm not a lawyer ..... just someone who's been keeping a beady eye on the passage of this legislation as I'm interested in buying a freehold house on a development with estate management charges.

PurplePow

WheatOne said:

To avoid the rentcharge, the more common route now for a new house is to have a restriction on the title so it can't be sold without agreement from the management company that payments are up to date.
This seems to be acceptable for mortgage companies, but gives the management companies less leverage in the short term.

I've not heard of this alternative being used for a house that previously had a rentcharge because while legally possible to make that change, it would be inconvenient having an estate with different properties under different arrangements.

So, it turns out this is what the solicitors for the management company were arguing, as there is some form of covenant?  However, there is also a separate SUDs charge on the estate which they have finally admitted could be seen as a rentcharge.

After weeks of this since I made this post, they have finally said today they would do a deed of variation (at a cost of £1,250 + VAT!) and they can't say how long it will take for them to sort it out. So the date the chain was aiming for completion in 2 weeks time will likely not happen and be delayed.

Frustrating considering persimmon produced a deed of variation for the property we're selling within a week, without fuss.

Gentoo365

PurplePow said:

WheatOne said:

To avoid the rentcharge, the more common route now for a new house is to have a restriction on the title so it can't be sold without agreement from the management company that payments are up to date.
This seems to be acceptable for mortgage companies, but gives the management companies less leverage in the short term.

I've not heard of this alternative being used for a house that previously had a rentcharge because while legally possible to make that change, it would be inconvenient having an estate with different properties under different arrangements.

So, it turns out this is what the solicitors for the management company were arguing, as there is some form of covenant?  However, there is also a separate SUDs charge on the estate which they have finally admitted could be seen as a rentcharge.

After weeks of this since I made this post, they have finally said today they would do a deed of variation (at a cost of £1,250 + VAT!) and they can't say how long it will take for them to sort it out. So the date the chain was aiming for completion in 2 weeks time will likely not happen and be delayed.

Frustrating considering persimmon produced a deed of variation for the property we're selling within a week, without fuss.

I think WheatOne is referring to new sales.

If an existing property were to change from 'rentcharge' to 'restriction' method then this still requires a deed of variation.

I suppose in reality the management company would rely on the restriction, but the lender is worried about some other future management company deciding to make use of the rentcharge law.

It would be good if there was a list of developers and whether they were happy to facilitate these deed variations for a reasonable sum or if they don't. 

It would at least mean developers have an incentive to be reasonable.

PurplePow

Yes it's been very frustrating. Completely different experience getting one from Persimmon for our house sale which was £200 and took less than a week to sort.

Our seller's didn't believe we'd need this as others on the estate have sold there's without this issue, apparently, and they wanted us to just accept an indemnity (although we hadn't even bothered to check if our lender would even accept that).  In the end we've had to go 50/50 with the seller to keep this moving.

Hope this experience helps others who come across this via google, as I did with others when researching.

akhan48

@PurplePow thanks for your help.
I am currently in the process of buying a house on a persimmon estate built in 2017 and my solicitor has questioned the sellers solicitors about estate management charges and the need for a Deed of Variation.
Your experience with Persimmon gives me some hope that they won’t make it a long drawn out process!

charlotte0000000001

@akhan48
@PurplePow

just enquiring how long the deed of variation process took for you as i am now in this situation and should have been completing Friday which will now not happen. 

akhan48

charlotte0000000001 said:

@akhan48
@PurplePow

just enquiring how long the deed of variation process took for you as i am now in this situation and should have been completing Friday which will now not happen. 

Hi Charlotte,

Sorry I've only just seen this.

My solicitor is saying all that's left before we can exchange contracts is the Deed of Variation being signed by Persimmon and Greenbelt!  Shocking really that this has been going on since October last year.  It's a standard template where they just plug in the sellers names, address, etc and just sign.  No idea why it takes so long.  I am the buyer, but apparently the sellers solicitor is chasing both Persimmon and Greenbelt on a regular basis to no avail.  

How is your transaction coming along?

Maffy52

eddddy said:

km1500 said:

And a home owner without a mortgage should be equally worried about this.

Hi eddddy, not sure if it is too late to comment on this discussion. I am currently buying a freehold house with a management company, but no mortgage. I am interested in your comment this also affecting homeowners without a mortgage. Is this because it makes the house less 'sale-able' in the future?