What Constitutes an Estate Rent Charge...

marshalex

eddddy said:

You can try saying something like this to the developer...

"My solicitor agrees with you that this isn't a rentcharge. But unfortunately, my buyer's mortgage lender is standing firm on this - so we're deadlocked.

So could you sign a deed of variation - just to allow the sale to go through - even though most of us agree it's not necessary?"

(I'd be tempted to try contacting the developer myself to move this forward, rather than doing it via solicitors.)



As the developer believes it's not a rentcharge, the developer will be no worse off by signing a deed promising not to use the powers associated with a rentcharge.

But there will be legal fees to pay. So you have to decide whether you'll pay them, or try to persuade your buyer to pay them.

Thanks for your replies, really helpful.

The first thing I asked was if we need to get this done, how much and how long which has so far gone unanswered due to the (pretty swift in all honesty) reply from the developers sols saying it's not a rent charge.

I contacted the developer (who left the site a couple of years ago now) who referred me to their solicitors to get it actioned. I did attempt to speak to their solicitors regarding it but was told that they are unable to discuss it with me and I would need to go via my solicitor. I also emailed them this morning effectively stating the above. 

I agree that the easiest option here is for the developers solicitors to backdown and produce the document (the management company did suggest a covenant stating that they would not use the powers associated with the rent charge but that was rejected by the lender) especially as it has no impact on them.

Having received visibility of the conversation history between my solicitor and the buyers, her (our) position has been set from the outset with the issue being the buyers solicitor isn't providing any of the reasoning as to why they believe it is a rentcharge, or providing copies of the lenders handbook to verify against.

It's definitely time all this was backed up with proper legislation.

eddddy

marshalex said:

...or providing copies of the lenders handbook to verify against.

This is probably the relevant section of the Lenders' Handbook. Quite a few of the Lenders mention their requirements in relation to rentcharges here.

https://lendershandbook.ukfinance.org.uk/lenders-handbook/englandandwales/question-list/1865/


Edit to add...

marshalex said:

 (the management company did suggest a covenant stating that they would not use the powers associated with the rent charge but that was rejected by the lender) 

If the lender doesn't want that, what is it they want instead?

marshalex

eddddy said:

marshalex said:

...or providing copies of the lenders handbook to verify against.

This is probably the relevant section of the Lenders' Handbook. Quite a few of the Lenders mention their requirements in relation to rentcharges here.

https://lendershandbook.ukfinance.org.uk/lenders-handbook/englandandwales/question-list/1865/


Edit to add...

marshalex said:

 (the management company did suggest a covenant stating that they would not use the powers associated with the rent charge but that was rejected by the lender) 

If the lender doesn't want that, what is it they want instead?

They're apparently insisting on the deed of variation. Everyone seems to be struggling to identify who the lender is so that all parties can review their criteria vs the existing provisions.

What certainly seems to be irking everyone currently is the lack of response from the buyers sols with the specific reasoning. So far the responses have just been they need it with no reasoning given and despite repeated attempts to get that sent over it's not forthcoming.

Am finding the whole process of trying to get this sorted so draining. 

eddddy

Just to clarify - when people talk about a Deed of Variation and a Covenant, they are almost certainly talking about the same thing.

In simple terms, a "Deed of Variation" is the document. The "Covenant" is "a promise" that's written down in that document.

So the Deed of Variation can contain one (or more) Covenants.


In simple terms, I would expect that the solution would be...

• A Deed of Variation that contains one Covenant (or promise)

• That one Covenant (or promise) in the Deed of Covenant would be something like this: "The Developer promises not use the powers associated with rentcharges"

marshalex

This is exactly what was proposed by the management company (the successor I believe it's termed in the transfer when the developer handed it over). They suggested the following addition as part of the transfer to the buyer.



No idea why that was rejected.

eddddy

marshalex said:

No idea why that was rejected.

You should ask the buyer for their side of the story.

Assuming you're selling through a 'conventional' estate agent, who does sales progression - phone the estate agent and say something like...

"The buyer (or their mortgage lender) asked for a Deed of Variation from the developer. The developer agreed and proposed some wording for the deed.

But things aren't moving forward. I don't know if the buyer's solicitor is unhappy with the proposed deed, or if there is some other problem.

Can you phone the buyer to ask them what's happening? And if they don't know, ask them to phone their solicitor to find out. And get back to me with their comments."

marshalex

Have asked that this morning. I can't work out why the covenant being proposed above would have been rejected, surely it has the same function as a deed of variation in that it would prevent the management company exercising any rights with section 121.
At this stage I feel I'm just going to have to leave it to the solicitors to fight it out amongst themselves and just hope it's done quickly

eddddy

marshalex said:

I can't work out why the covenant being proposed above would have been rejected, surely it has the same function as a deed of variation in that it would prevent the management company exercising any rights with section 121.

Just to clarify again - one person uses the word "Covenant" and another person uses the words "Deed of Variation" - but it's very likely that they both mean exactly the same thing.

So it's not 2 different things with the same function. Instead, it's one thing that is described in 2 different ways.


As an analogy..,
- Alex asks you for your "contact details"
- Sam asks you for your "address and phone number"

Alex and Sam are using different words, but it's very likely that they are both asking you for the same thing.




Edit to add...

I mention this in case you contact the developer to ask them to do a "Deed of Variation instead" of a "Covenant".

That might confuse everyone - it's a bit like saying "give me your contact details instead of giving me your address and phone number".

marshalex

So we've had an update today, another property sale on our estate, who's purchasers are using the same sols as our buyers have come up against the same issue, however today they have reassessed the requirements and backed down.
As this other solicitor is head of conveyancing at the company I'm hoping this allows things to progress.

HelpfulLittleHelper

I'd ask for them to then move your case to this head solicitor as he should be able to push it through. We faced similar issues when buying ours with a rent charge/maintenance fee on a freehold house and deeds of variations being completely rejected. Our solution was to go via a different mortgage company that didn't have these specific rent charge rules in their handbook.