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Selling problem due to ground rent


Comments
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Yes it is a common problem with certain lenders. The buyers have selected an inappropriate lender under the circumstances.
So the options are …
The buyers re-apply to a lender who doesn’t mind rent above £250.
The existing mortgage co accepts the variation to the lease. ( many do accept what is proposed) It will cost you in time and fees.
You find another buyer and warn them upfront about the rent so they can choose a suitable mortgage co.
It is not really practical to extend the lease at this stage. It will be costly and time consuming and it would in any case require the price to be renegotiated as the flat would offer better value with a peppercorn rent and a longer lease.
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Taking a step back - the reason mortgage lenders don't like ground rent over £250, is that the freeholder might be able to use Ground 8 of Schedule 2 to the Housing Act 1988 to repossess the flat , if the ground rent is in arrears.
Firstly... many mortgage lenders will allow that, if the seller buys indemnity insurance.
Secondly, your freeholder is offering to do a lease variation saying 2 things:- 1) The freeholder 'promises' not to use Ground 8 of Schedule 2 to the Housing Act 1988 to repossess the flat
- 2) The freeholder 'promises' to give the mortgage lender 14 days notice before repossessing the flat for any reason - so that the mortgage lender can pay the ground rent arrears etc.
So that should be a 100% solution to the problem. Is your buyer's mortgage lender happy with that? (And indemnity insurance shouldn't be needed in that case).
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eddddy said:
Taking a step back - the reason mortgage lenders don't like ground rent over £250, is that the freeholder might be able to use Ground 8 of Schedule 2 to the Housing Act 1988 to repossess the flat , if the ground rent is in arrears.
Firstly... many mortgage lenders will allow that, if the seller buys indemnity insurance.
Secondly, your freeholder is offering to do a lease variation saying 2 things:- 1) The freeholder 'promises' not to use Ground 8 of Schedule 2 to the Housing Act 1988 to repossess the flat
- 2) The freeholder 'promises' to give the mortgage lender 14 days notice before repossessing the flat for any reason - so that the mortgage lender can pay the ground rent arrears etc.
So that should be a 100% solution to the problem. Is your buyer's mortgage lender happy with that? (And indemnity insurance shouldn't be needed in that case).It’s strange that it’s taken since December, when I accepted the offer, until this week to find all this out though.I’ve read a lot about this since Friday and have been feeling really worried that it has made my flat totally unsaleable but hopefully there will be a fix.My solicitor is saying the only way round this may be to extend the lease but we have 108 years unexpired so I’m not sure if this helps or would even be practical.0 -
anselld said:Yes it is a common problem with certain lenders. The buyers have selected an inappropriate lender under the circumstances.
So the options are …
The buyers re-apply to a lender who doesn’t mind rent above £250.
The existing mortgage co accepts the variation to the lease. ( many do accept what is proposed) It will cost you in time and fees.
You find another buyer and warn them upfront about the rent so they can choose a suitable mortgage co.
It is not really practical to extend the lease at this stage. It will be costly and time consuming and it would in any case require the price to be renegotiated as the flat would offer better value with a peppercorn rent and a longer lease.
My solicitor seems to think extending the lease is the only real option. It looks like the whole chain is about to fall through because of it which is very frustrating as I accepted an offer in December and all this has only just come to light re: my buyers lender0 -
Flooxx said:anselld said:Yes it is a common problem with certain lenders. The buyers have selected an inappropriate lender under the circumstances.
So the options are …
The buyers re-apply to a lender who doesn’t mind rent above £250.
The existing mortgage co accepts the variation to the lease. ( many do accept what is proposed) It will cost you in time and fees.
You find another buyer and warn them upfront about the rent so they can choose a suitable mortgage co.
It is not really practical to extend the lease at this stage. It will be costly and time consuming and it would in any case require the price to be renegotiated as the flat would offer better value with a peppercorn rent and a longer lease.
My solicitor seems to think extending the lease is the only real option. It looks like the whole chain is about to fall through because of it which is very frustrating as I accepted an offer in December and all this has only just come to light re: my buyers lenderAre you sure the proposed lease amendment option (rather than the indemnity) has actually been put to the buyers’ mortgage co?0 -
Flooxx said:My solicitor is saying the only way round this may be to extend the lease but we have 108 years unexpired so I’m not sure if this helps or would even be practical.
A 'Statutory Lease Extension' is possible and would solve the problem - but it usually takes between 6 months and 18 months to complete. (And might cost £10k+, including fees)
Just to clarify - who received that email from the freeholder?
Are you saying that...- your solicitor received that email from the freeholder.
- your solicitor passed it to the buyer's solicitor
- the buyer's solicitor replied that the freeholder's offer made in that email is unacceptable to the buyer's lender
If so, I'm wondering if the buyer's solicitor is perhaps a 'conveyor belt solicitor' who just likes to tick boxes, and walk-away from anything that's a little non-standard, because they don't want to do any extra work.
FWIW, your freeholder's email seems to suggest that they are knowledgeable and sensible. You could try going back to them saying something like...
"I realise that the buyer's lender seems to be unreasonable about this, but they are refusing to back down, Therefore, could you give me a quote for a lease variation that would cap the ground rent at £250."
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eddddy said:Flooxx said:My solicitor is saying the only way round this may be to extend the lease but we have 108 years unexpired so I’m not sure if this helps or would even be practical.
A 'Statutory Lease Extension' is possible and would solve the problem - but it usually takes between 6 months and 18 months to complete. (And might cost £10k+, including fees)
Just to clarify - who received that email from the freeholder?
Are you saying that...- your solicitor received that email from the freeholder.
- your solicitor passed it to the buyer's solicitor
- the buyer's solicitor replied that the freeholder's offer made in that email is unacceptable to the buyer's lender
If so, I'm wondering if the buyer's solicitor is perhaps a 'conveyor belt solicitor' who just likes to tick boxes, and walk-away from anything that's a little non-standard, because they don't want to do any extra work.
FWIW, your freeholder's email seems to suggest that they are knowledgeable and sensible. You could try going back to them saying something like...
"I realise that the buyer's lender seems to be unreasonable about this, but they are refusing to back down, Therefore, could you give me a quote for a lease variation that would cap the ground rent at £250."I just can’t believe it’s taken since the beginning of December to find this out.0 -
anselld said:Flooxx said:anselld said:Yes it is a common problem with certain lenders. The buyers have selected an inappropriate lender under the circumstances.
So the options are …
The buyers re-apply to a lender who doesn’t mind rent above £250.
The existing mortgage co accepts the variation to the lease. ( many do accept what is proposed) It will cost you in time and fees.
You find another buyer and warn them upfront about the rent so they can choose a suitable mortgage co.
It is not really practical to extend the lease at this stage. It will be costly and time consuming and it would in any case require the price to be renegotiated as the flat would offer better value with a peppercorn rent and a longer lease.
My solicitor seems to think extending the lease is the only real option. It looks like the whole chain is about to fall through because of it which is very frustrating as I accepted an offer in December and all this has only just come to light re: my buyers lenderAre you sure the proposed lease amendment option (rather than the indemnity) has actually been put to the buyers’ mortgage co?anselld said:Flooxx said:anselld said:Yes it is a common problem with certain lenders. The buyers have selected an inappropriate lender under the circumstances.
So the options are …
The buyers re-apply to a lender who doesn’t mind rent above £250.
The existing mortgage co accepts the variation to the lease. ( many do accept what is proposed) It will cost you in time and fees.
You find another buyer and warn them upfront about the rent so they can choose a suitable mortgage co.
It is not really practical to extend the lease at this stage. It will be costly and time consuming and it would in any case require the price to be renegotiated as the flat would offer better value with a peppercorn rent and a longer lease.
My solicitor seems to think extending the lease is the only real option. It looks like the whole chain is about to fall through because of it which is very frustrating as I accepted an offer in December and all this has only just come to light re: my buyers lenderAre you sure the proposed lease amendment option (rather than the indemnity) has actually been put to the buyers’ mortgage co?Unfortunately the buyers lender has advised they will not lend to the buyer unless the ground rent is capped at £250 per annum. I further understand it has taken so long for them to respond due to internal reviews of the lenders risks regarding loans on leasehold property. So we could not have known this outcome previously. The Landlord has previously said they will not amend the ground rent. I have sent them the attached email and I will let you know as soon as they respond.
You will note that the email also refers to a lease extension which may be the only alternative to reduce the ground rent.
Either way I expect this is going to take a few more weeks until we know for certain whether the buyer can proceed.
I fully appreciate this is yet more disappointment for you.
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In that case I would be inclined to put the flat back on the market at this point. The majority of lenders would be ok with this. Buyers just needs to take reasonable care over their choice of lender.
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anselld said:In that case I would be inclined to put the flat back on the market at this point. The majority of lenders would be ok with this. Buyers just needs to take reasonable care over their choice of lender.
Hi, so we now need to wait for Homeground (the Landlord) about whether they will agree a deed of variation with the wording required by the buyers lender. I sent the email urgently this morning so I hope we hear back next week
So I’m guessing the lender wants a different variation? I have asked my solicitor countless times for brief explanations of things but it’s really been quite difficult.
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