Deed of variation on ground rent

ShirleyJefferies

My son lost the sale of his flat due to the lender (Nationwide) requiring a deed of variation (DOV) on the ground rent which the Landlord (David Wilson Homes) refused to provide.  The only solution they offered was to not repossess the property if the rent wasn't paid. 

He then found a cash buyer, so we thought we wouldn't have this problem again, however 4 months down the line, they too are asking for this.  

Is there any way around this?  We are desperate to find a solution.

When he bought it 8 years ago, this was never mentioned, so why are we having this problem now?

user1977

What is the variation being requested?

HelpfulLittleHelper

We had the same issue when trying to buy our current house earlier this year. People all along the development were fine for years but some rule change recently must have triggered this. In our case it's a freehold house with a rent charge for upkeep of the local area. A DOV to have a legal document saying they won't reposes if you don't pay was required but the management company also wouldn't do this and was quite firm on it as well.

This also meant we couldn't port our previous mortgage (losing out on the lower rate we had AND a fat early repayment fee....) and wasted loads of time trying to get 2 different mortgages, going through the ID checks and application process all for nothing. So eventually we had to go through a mortgage broker and go with a company that didn't have the ground rent clause in their T&Cs. That's after trying the companies suggested by the local estate agent who was supposed to be knowledgeable about it all (after all, they deal with this development all the time you'd think...)

FYI, YBS and Barclays both said initially that it 'should' be fine but when it went to the underwriters in both cases it was rejected as they both wanted the DOV which was impossible. Eventually we ended up with Santander who did not require the DOV so might be worth going with them?

eurobabe

Check with your solicitor as you maybe able to indemnity insurance to cover this as some lenders accept this instead of a DOV, which far cheaper and quicker.

eddddy

ShirleyJefferies said:

My son lost the sale of his flat due to the lender (Nationwide) requiring a deed of variation (DOV) on the ground rent which the Landlord (David Wilson Homes) refused to provide.  The only solution they offered was to not repossess the property if the rent wasn't paid. 

That sounds like the issue is ground rent over £250 (or over £1000 in London). Is that correct?

If so, a DoV 'promising not to repossess' is usually an acceptable solution for mortgage lenders (and a good solution for buyers).

Do you know why it's not acceptable to the buyers, and/or what type of DoV the buyers were hoping for?

michael1234

Isn't there a new bill being laid down in parliament next week that may well address ground rent (i.e. abolish or cap it?)

Might be worth waiting until then although appreciate it could be many, many more months before it becomes law although if clearly on the horizon there might be a deal to be done with the current Freeholder?

CherryK87

We are also in exactly the same position. Ground rent is about to increase from £200 per year to £300 and our buyer has already lost one mortgage lender even though the freeholder offered to provide a DOV to say they will not repossess if they default on the ground rent, which we as the seller would have to pay to have included in the lease. But this was not accepted either. So our sale may possibly fall through too. So frustrating. We had no idea about this and were not told about any issues when we bought, so it must be that lenders have become a lot more strict on the matter. There is talk of government legislation coming in, but that could take years, so unfortunately is unlikely to help us with our sale now. I'm beyond stressed with it all.

eddddy

CherryK87 said:

We are also in exactly the same position. Ground rent is about to increase from £200 per year to £300 and our buyer has already lost one mortgage lender even though the freeholder offered to provide a DOV to say they will not repossess if they default on the ground rent, which we as the seller would have to pay to have included in the lease. But this was not accepted either. 

This sounds slightly strange.

Typically, there is just one problem with having ground rent over £250...  If you fail to pay the ground rent for 3 months, it's relatively easy for the freeholder to repossess the flat.

But if the freeholder signs a DoV saying "I won't repossess the flat" - the problem is 100% solved.

There shouldn't be any reason not to proceed.

CherryK87

eddddy said:

CherryK87 said:

We are also in exactly the same position. Ground rent is about to increase from £200 per year to £300 and our buyer has already lost one mortgage lender even though the freeholder offered to provide a DOV to say they will not repossess if they default on the ground rent, which we as the seller would have to pay to have included in the lease. But this was not accepted either. 

This sounds slightly strange.

Typically, there is just one problem with having ground rent over £250...  If you fail to pay the ground rent for 3 months, it's relatively easy for the freeholder to repossess the flat.

But if the freeholder signs a DoV saying "I won't repossess the flat" - the problem is 100% solved.

There shouldn't be any reason not to proceed.

I agree! You think this would resolve the issue, but to that particular lender, they still were not happy and I believe the only DOV they would have accepted was one where the ground rent was capped to £250 per annum. 

eurobabe

CherryK87 said:

eddddy said:

CherryK87 said:

We are also in exactly the same position. Ground rent is about to increase from £200 per year to £300 and our buyer has already lost one mortgage lender even though the freeholder offered to provide a DOV to say they will not repossess if they default on the ground rent, which we as the seller would have to pay to have included in the lease. But this was not accepted either. 

This sounds slightly strange.

Typically, there is just one problem with having ground rent over £250...  If you fail to pay the ground rent for 3 months, it's relatively easy for the freeholder to repossess the flat.

But if the freeholder signs a DoV saying "I won't repossess the flat" - the problem is 100% solved.

There shouldn't be any reason not to proceed.

I agree! You think this would resolve the issue, but to that particular lender, they still were not happy and I believe the only DOV they would have accepted was one where the ground rent was capped to £250 per annum. 

There's indemnity insurance that can be set up in place of the dead of variation that's far cheaper and quicker.Sone lenders are content with this just to cover.it.Solicitors can set this up

user1977

michael1234 said:

Isn't there a new bill being laid down in parliament next week that may well address ground rent (i.e. abolish or cap it?)

Not quite, but the Renters Rights Bill includes a clause to deal with the issue of long leases “accidentally” becoming assured tenancies if their rent is too high, which appears to be the problem here. Not going to happen immediately though.