House Purchase with Outstanding Land Charge

bucaramanga

Hello

I have had an offer accepted for a house and my solicitor has completed searches. The local searches revealed the house has an outstanding land charge. The charge is for a disabled facilities grant for work done a couple of years ago which must be repaid if the house is sold within ten years. 
The charge is for a little under 20,000 pounds. 

My solicitor advised the land charge must be repaid by the sellers before completion and contacted the sellers solicitors. 

The sellers solicitors came back to my solicitor and has said they would repay this on completion. 

I queried this with my solicitor when exactly would it be repaid. After exchange of contracts or after full payment is made by me, and how we will know it has been repaid. 

My solicitor responded,  the sellers ... have provided a further undertaking at our request...  they have undertaken that they will settle the amount outstanding on the disabled facilities grant on completion, and provide evidence and confirmation from the local authority once ... received,,, from the LA. 

I am uneasy with this. As I understand it, the land charge will be paid after I pay for the house, not before. I understand the undertaking for the sellers to pay it on completion, but this will be at the point after I have paid for the house in full. Not before, and not at the same  time I pay for the house, 

I will be buying a house with a land charge against it?

... and will depend on the sellers at this point to follow their undertaking to repay it.

 Do they have a legal obligation to pay it, as they have said they will? If they don't pay it, or there is a problem paying it, where do I stand? 

I feel the risk has been placed on me regarding this repayment. 

Any advice is appreciated. 

Thank you. 

youth_leader

It sounds like they need your money to pay it doesn't it.  How much is the deposit on exchange, could they use that if it is £20k?

daveyjp

As long as the mortgage company has priority charge any subsequent charges are largely ineffective.  You just need a mechanism for the £20k to be retained by your solicitor so it can be paid to the local authority as it is unlikely their systems and speed will align with yours.

user1977

It's exactly the same principle as repaying, say, a normal mortgage. The buyer is likely to be already in the house and unpacking before the seller's mortgage lender receives their money. You can't literally have everything happening simultaneously so the solicitors rely on undertakings for this sort of thing. All perfectly normal.

I suppose a more general question is, why don't you trust your own solicitor's advice?

loubel

As user1977 says, it is the same with paying off the mortgage - it is done on receipt of your purchase funds. The seller's solicitor has given an undertaking  (a binding professional promise) to do so. This is quite normal and nothing to worry about.

Yorkie1

As loubel says, a solicitor's "undertaking" is a professional commitment upon which you can rely.

Tiglet2

bucaramanga said:

Hello

I have had an offer accepted for a house and my solicitor has completed searches. The local searches revealed the house has an outstanding land charge. The charge is for a disabled facilities grant for work done a couple of years ago which must be repaid if the house is sold within ten years. 
The charge is for a little under 20,000 pounds. 

My solicitor advised the land charge must be repaid by the sellers before completion and contacted the sellers solicitors. 

The sellers solicitors came back to my solicitor and has said they would repay this on completion. 

I queried this with my solicitor when exactly would it be repaid. After exchange of contracts or after full payment is made by me, and how we will know it has been repaid. 

My solicitor responded,  the sellers ... have provided a further undertaking at our request...  they have undertaken that they will settle the amount outstanding on the disabled facilities grant on completion, and provide evidence and confirmation from the local authority once ... received,,, from the LA. 

I am uneasy with this. As I understand it, the land charge will be paid after I pay for the house, not before. I understand the undertaking for the sellers to pay it on completion, but this will be at the point after I have paid for the house in full. Not before, and not at the same  time I pay for the house, 

I will be buying a house with a land charge against it?

... and will depend on the sellers at this point to follow their undertaking to repay it.

 Do they have a legal obligation to pay it, as they have said they will? If they don't pay it, or there is a problem paying it, where do I stand? 

I feel the risk has been placed on me regarding this repayment. 

Any advice is appreciated. 

Thank you. 

Yes, all perfectly normal.

If the seller had £20,000 available to pay off the loan, they could do it before completion.  This would mean that the lender would need to remove their charge over the property and your solicitor would require an updated Register of Title to show that the charge was no longer there.  This could take some time.

Far easier to pay off the loan with the sale proceeds.  Your purchase monies will not reach the seller's solicitors until the day of completion, so their solicitor will only be able to pay off any debits (outstanding mortgage, the grant etc) after the monies are in their client account.  The Undertaking they've provided, is their legal promise to do this once completion has taken place,

GDB2222

One point that's not been made explicitly is that the seller's solicitor will hang onto the £20k. It will be deducted from the money the sellers receive. 

Tiglet2

GDB2222 said:

One point that's not been made explicitly is that the seller's solicitor will hang onto the £20k. It will be deducted from the money the sellers receive. 

Yes, correct.  In the same way that the seller's solicitors hangs on to the amount outstanding to repay the mortgage, they will also hang on to the disabled grant monies.  The seller will receive only monies in excess of the owed amounts.  The excess monies will either be paid to the sellers directly or put towards their onward purchase.

bucaramanga

Thanks for the answers. It is a cash purchase and I do suspect they need the purchase price to repay the charge. 

I had no idea of the legal nature of an undertaking.    

Section62

daveyjp said:

As long as the mortgage company has priority charge any subsequent charges are largely ineffective.  You just need a mechanism for the £20k to be retained by your solicitor so it can be paid to the local authority as it is unlikely their systems and speed will align with yours.

AIUI local land charges have precedence over other charges such as a mortgage - although the OP doesn't specify, if the improvement grant was a local authority one then a local land charge might be the way they've protected it.