Estate Rent Charge - Deed of Variation

chumdrumBedrum

** In the interest of respect and anonymity, companies and solicitors names have been replaced or omitted **

TLDR

Our house purchase is stalled due to a legal issue with an estate rent charge. Lender requires a deed of variation, but progress is very slow. Seeking advice on next steps.

Our Situation

My wife and I had our offer accepted on a freehold house in March 2024. The property is around 8-9 years old. We quickly instructed a solicitor and applied for a mortgage with the help of our adviser.

A few months into conveyancing, our solicitor informed us that the property is subject to a modern estate rent charge, collected by Company X in exchange for maintaining green areas. Under Section 121 of the Law of Property Act 1925, failure to pay within 28 days could allow them to repossess the property.

Worse still, Company X is not required to notify the mortgage lender before taking action, which made our lender unwilling to proceed.

Our Options

1. Find a new lender willing to accept the risk. Faster, but it could cause issues when selling in the future.

2. Obtain a deed of variation requiring Company X to notify the lender before taking legal action. Slower and comes with additional costs, but we felt it was the safer long-term choice.

We were also told an indemnity policy might work, but many lenders (including ours) wouldn't accept it. Plus, it wouldn’t fix the underlying issue, potentially leaving us in the same situation when selling.

Delays and Problems

The deed of variation process dragged on with no progress for months.

Meanwhile the sale of our house nearly fell through due to us not being able to move out and into this house. We had to move in with family to avoid losing our buyer.

Company X’s solicitor initially refused the deed of variation, arguing the charge wasn’t technically a rent charge.

"Company x's Initial Annual Sum and Annual Sum were not intended to be a rentcharge for the purposes of the Rentcharge Act and, on this basis, does not believe that the remedies under S121 of the LPA 1925 to be available to Company x in respect of these sums and we would not propose entering into a Deed of Variation."

Our solicitor disagreed.

Eventually our mortgage offer expired, forcing us to reapply, which took longer due to financial irregularities.

Despite constant chasing, our solicitor now doubts the deed will ever be granted, but is still pursuing it.

Where We Stand Now

We feel stuck and exhausted. Our solicitor’s efforts seem to be slowing down, and chasing estate agents hasn’t helped. The delay seems to be on Company X’s solicitor or the original developer’s solicitor—it’s unclear.

Our Questions

Is there anything else we can do to push this forward?

Should we wait it out for the deed of variation or consider an indemnity policy?

How risky is an indemnity policy long-term? Could it prevent us from re-mortgaging later, stuck paying a high variable rate?

Would issuing an ultimatum help? We know this is a last resort and should not be given lightly unless prepared to follow through, but at what point should we consider it?

Any advice would be deeply appreciated.

eddddy

Here's what a number of lenders say about Estate Rent Charges:
https://lendershandbook.ukfinance.org.uk/lenders-handbook/englandandwales/question-list/1865/

They generally say that a Deed of Variation is required - and that Indemnity Insurance isn't an acceptable alternative.


Have the sellers tried contacting Company X directly, to speak to somebody about the problem?

That might get a better result than 'bland' emails passing backwards and forwards between solicitors.

Flugelhorn

this is difficult if they are not cooperating - where I live I think all sales on the estate get a DoV (even the cash purchases as easier to sort now) - would be rather quicker than them arguing about whether it was needed or not