Selling Leasehold Flat - Ground Rent

Bfowler91

Hi,
So much mixed info on the topic but maybe someone informed can help.
In process of selling my leasehold flat. Buyers solicitor has noted a ground rent escalation clause. My ground rent is £350 per annum and review period of every 10 years in line with RPI. My lease is 100 years unexpired.
The buyers solicitors have asked for an indemnity policy of which my solicitor is arranging. I’ve seen posts saying some lenders decline and some saying majority of lenders accept this.
Is there anywhere I can find out for sure?! 

Should the indemnity policy be accepted I assume my buyer would just need to arrange the same in the future should they look to sell (unless they extend the lease and abolish the GR clause..) along with ensuring they pay the ground rent, or this goes away in the future with the reforms. 

Should I be worried about anything else on this matter impacting my sale!?

NameUnavailable

Hopefully the buyers solicitors have already confirmed with their lenders that they will accept the insurance?

eddddy

Bfowler91 said:

I’ve seen posts saying some lenders decline and some saying majority of lenders accept this.
Is there anywhere I can find out for sure?! 

All the (main) mortgage lenders were asked about this, and here are their answers:

https://lendershandbook.ukfinance.org.uk/lenders-handbook/englandandwales/question-list/1852/

(but some didn't give a specific answer - so the buyer's solicitor might need to contact them to find out)


But perhaps you need to understand the jargon a bit...

If the mortgage lender mentions the "Housing Act 1988", maybe like this: 

"Where ground rent provisions cause (or, during the term of the mortgage, are likely to cause) the lease to be treated as an assured shorthold tenancy under the Housing Act 1988..."

... they mean "Where the ground rent is over £250 outside London or over £1000 within London"

Bfowler91

Thanks. Our flat is GR is less than 0.1% of the value currently and is linked to RPI every 10 years, not a doubling ground rent so hopefully the policy will suffice! 

It’s strange because I’m in a Facebook group ‘National abolish the leasehold’ and there are comments from people saying some lenders decline the indemnity policy contrary to the handbook criteria they have set out which seems a bit odd! 

eddddy

Thanks. Our flat is GR is less than 0.1% of the value currently and is linked to RPI every 10 years, not a doubling ground rent so hopefully the policy will suffice! 

It’s strange because I’m in a Facebook group ‘National abolish the leasehold’ and there are comments from people saying some lenders decline the indemnity policy contrary to the handbook criteria they have set out which seems a bit odd! 

Yes - occasionally people post on this board saying the ground rent is over £250 and they've been refused a mortgage.

But when asked if they're sure that's the specific reason for refusal, and, for example, it's not ground rent review period, or ground rent percentage of property value - they never seem to reply.

So it's not clear if some lenders are using tougher criteria than stated in the handbook, or if a few people are confused about the precise reason for a mortgage refusal.