Freehold house sale with a service charge causing issues

Homeseller1988

Hi All,
Looking for some advice or experiences from anyone who has bought or sold a freehold house with a service charge.

I am currently selling my new build house (built in 2019). It is subject to a service charge of £81 per annum. I have not had to pay anything yet, as houses are still being built on the site and the builder has specified that everyone will be billed from once the entire site has been completed.

My buyers solicitor will not accept that the service charge is just a service charge, and is saying it is infact a rent charge? My solicitor is satisfied that it is only a service charge and is not sure why the buyers side will not accept this.
The buyers solicitor has gone to their lender and stated there is a rent charge associated with the house, and now we seem to be stuck, and nobody seems to be giving answers on what happens next?

My solicitor has been chasing about this final enquiry for weeks and weeks and we are getting no reponse or update.

Does anyone have any idea how this type of 'problem' gets resolved? 

I've recently been in touch with two other neighbours on the site who have just completed on selling their new builds on to second-time owners, and neither of them had any issues with their buyers lenders or solicitors accepting the service charge or seeing it as an issue.

So i'm a little confused and frustrated that this seems to be happening with my sale.

Any help is much appreciated.

P.S I will never buy a new build again.

DE_612183

Tell the EA to tell the buyer that their solicitors are being intransigent, and if not sorted you'll have no option but to re market.

This is a management charge / service charge - not a rental.

Southend_2

A rentcharge owner can take action (including creating a lease on your house) if you haven't paid the rentcharge.... even if they haven't demanded payment. You may need the rentcharge owner to confirm that they will not enforce any unpaid amount under s121 of the law of property act. I'm not an expert but have experience of buying a property with an estate rentcharge. Your land registry documents should mention a rentcharge covenant if there is one.

fluffymuffy

Homeseller1988 said:

P.S I will never buy a new build again.

We looked at a few new housing estates recently. All had a service charge to pay for their Biodiversity Net Gain green features, which was initially about £200/year but presumably only increases in mysterious and unaccountable ways. We vowed never to buy a house with such unknown and uncontrollable future costs.

RelievedSheff

fluffymuffy said:

Homeseller1988 said:

P.S I will never buy a new build again.

We looked at a few new housing estates recently. All had a service charge to pay for their Biodiversity Net Gain green features, which was initially about £200/year but presumably only increases in mysterious and unaccountable ways. We vowed never to buy a house with such unknown and uncontrollable future costs.

Not all new build estates have these charges. Ours doesn't.

Homeseller1988

Thanks all for your replies so far.

There is no rent charge covenant on my land registry documents.

One of the ladies who has recently sold, has shown me a screenshot of an email that the builders legal team sent to her, confirming that it is NOT a rent charge, but a service charge, and they are two very different things.

So I have asked the legal team to send this wording to my and my buyers solicitors - I have no idea if this is enough to resolve the whole subject now.

There has never been any mention of a rent charge anywhere, and there is no covenant on my registry documents for this, so how does one tell the difference between a rent charge and a service charge?
Any documentation sent has always included the term 'service charge'.

DE_612183

If I was being cynical I'd say the buyers solicitors are creating work for themselves in order to inflate their fees for the buyer....

Tiglet2

Homeseller1988 said:

Hi All,
Looking for some advice or experiences from anyone who has bought or sold a freehold house with a service charge.

I am currently selling my new build house (built in 2019). It is subject to a service charge of £81 per annum. I have not had to pay anything yet, as houses are still being built on the site and the builder has specified that everyone will be billed from once the entire site has been completed.

My buyers solicitor will not accept that the service charge is just a service charge, and is saying it is infact a rent charge? My solicitor is satisfied that it is only a service charge and is not sure why the buyers side will not accept this.
The buyers solicitor has gone to their lender and stated there is a rent charge associated with the house, and now we seem to be stuck, and nobody seems to be giving answers on what happens next?

My solicitor has been chasing about this final enquiry for weeks and weeks and we are getting no reponse or update.

Does anyone have any idea how this type of 'problem' gets resolved? 

I've recently been in touch with two other neighbours on the site who have just completed on selling their new builds on to second-time owners, and neither of them had any issues with their buyers lenders or solicitors accepting the service charge or seeing it as an issue.

So i'm a little confused and frustrated that this seems to be happening with my sale.

Any help is much appreciated.

P.S I will never buy a new build again.

If you have your documents from when you bought the property - in particular the TP1 (Transfer of Part), please carefully read the clauses. 

Estate rent charges and service charges generally have become very commonplace on modern developments.   I'm sure your solicitor will have obtained a copy of this which he would have sent to the buyer's solicitor, but it might be prudent for you to read the document yourself just to make sure that there is a provision in the deed which states that the service charge/estate rent charge excludes Section 121 (3) and (4) of the Law of Property Act 1925.  It is these provisions that enables a rent charge owner to take possession of a property and grant a lease to trustees in respect of any rent charge owing for forty days or more. 

In the worst case scenario, namely that the deed does not exclude these provisions , the buyer's solicitor would report the estate rent charge to their mortgage lender and advise them that the right of the estate rent charge owner to take possession applies. 

Please note that many mortgage lenders have specific provisions relating to estate rent charges, typically that the management company that imposes the rent charge should be owned by the residents of the development, that the relevant sections of 121 LPA 1925 are excluded, and that the deed requires the management company to serve prior notice on the mortgage lender prior to commencing any action.

Hope this helps!

HelpfulLittleHelper

If there is reference to rent charge in the deeds, the buyers could look at another bank that is willing to accept this and still give a mortgage. Some don't unless you get a deed of variation, which is unlikely to be given as most management companies don't as we found out while buying our house.
So for example Yorkshire, Barclays and I'm sure there will be plenty more just flat out refuse it AFTER you go through all the hassle of the application despite mentioning the rent charge at the start, wasting a lot of time with you having all the meetings to go over all the information, the ID checks etc. Very frustrating and I hope you don't have to deal with that.
Eventually we found that Santander would give a mortgage without this deed of variation so might be worth looking at them? Or using a mortgage broker who might be able to find some other options for your particular purchase.

badger09

HelpfulLittleHelper said:

If there is reference to rent charge in the deeds, the buyers could look at another bank that is willing to accept this and still give a mortgage. Some don't unless you get a deed of variation, which is unlikely to be given as most management companies don't as we found out while buying our house.
So for example Yorkshire, Barclays and I'm sure there will be plenty more just flat out refuse it AFTER you go through all the hassle of the application despite mentioning the rent charge at the start, wasting a lot of time with you having all the meetings to go over all the information, the ID checks etc. Very frustrating and I hope you don't have to deal with that.
Eventually we found that Santander would give a mortgage without this deed of variation so might be worth looking at them? Or using a mortgage broker who might be able to find some other options for your particular purchase.

BIB
OP is selling, not buying. 

YoungBlueEyes

Could you ask the builders' legal team to send you an email stating that it's a service charge not a rent charge? You then send that to your sol who forwards it to your buyers sol.