| Conveyancing Help 14:07 - Jul 22 with 606 views | godalmingblue |
After reading other posters receiving advice on similar issues I though I'd try as well.
I am in the process of purchasing my first property, which I am currently renting. My offer and mortgage were accepted and approved in March and have been going through legal's since then.
The issue I have is that the property is a Leasehold and there is a term in the Lease regarding escalating ground rent (which isn't collected as per the terms of the lease anyway!)
My conveyancing solicitor asked the sellers solicitor to get the terms of lease amended on the 23rd April, and from what I can see, this wasn't started to be actioned until the 11th June, and is still outstanding!
I am still paying rent to the seller and they are refusing to budge on the final selling price, this could drag on and on with them receiving more and more rent money from me.
My solicitor has legally said that there is nothing I can do to speed up the process and the sellers have no obligation to renegotiate on the selling price, my only options are to wait or threaten to pull out of the sale completely, leaving me out of pocket as the mortgage broker/ solicitors fee's will still have to be paid.
Can anyone advise me on whether there is anything I can actually do in this situation?
Cheers |  | | |  |
| Conveyancing Help on 14:15 - Jul 22 with 557 views | Dennyx4 |
Not sure there is much you can do. If I am reading this right, you are looking to get the escalating rent charge replaced with a static charge or deleted altogether.
This may not be in the control of the person you let from, and may be a query that has gone to the freeholder, assuming that they are not the same person? If this is a deal breaker, try to give a deadline as to when you are prepared to wait for to hear back.
Your Offer letter from your mortgage company usually lasts for 6 months, and it may be a way of getting all parties to focus their minds on completion before expiry. [Post edited 22 Jul 14:16]
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| Conveyancing Help on 14:38 - Jul 22 with 492 views | Zx1988 |
More than happy to help - I'm a surveyor and registered valuer, specialising in leasehold property.
First, I'm going to assume that the property you're buying is a flat? Let me know if it's a house, as they come under an entirely different regime.
The 'non-collection' clause in respect of the ground rent sounds interesting - are you able to post the wording of the clause here? If the ground rent simply cannot be collected by the freeholder, under the terms of the lease, it would feel as if it's a non-issue.
Otherwise, I can envisage that there are a couple of potential issues here:
If the ground rent will increase above £250 per annum during the course of the lease (and you are not situated in Greater London), the lease will convert into an Assured Shorthold Tenancy. The issue here is that, under an AST and the Rent Act 1988, if the rent then goes unpaid for three months, the freeholder can apply to a Court for a mandatory possession order. There is no mitigation, and the Court must grant possession. Lenders don't like this, as it means that they can lose their security over a debt of a few pounds.
Second, if the rent is (or will increase) above 0.1% of the value of the property, it can be classed as onerous and lenders won't like it.
Finally, lenders also get twitchy if the rent increases too much, too frequently, or by amounts that are difficult to ascertain.
If any of these three issues apply, then lenders generally won't lend without either a Mortgage Protection Clause (in the event of the first issue), or a Deed of Variation. Freeholders are under no obligation to provide either.
Assuming this is the issue, the fix is to extend the lease under the provisions of LRHUDA 1993. This entitles you to an extra 90 years on the lease (which you may or may not need) and, most importantly, the ground rent to be reduced to a peppercorn (the legal/contractual equivalent of nothing). The freeholder cannot (except in a few very limited circumstances) refuse a lease extension.
My advice would be to ascertain the likely cost of extending the lease, and re-offer on that basis.
More than happy to answer any other questions you might have, either here or via PM. | |
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| Conveyancing Help on 14:52 - Jul 22 with 433 views | Zx1988 |
At this point I wouldn't hang my hat on any of the unenacted bits and pieces either being enacted any time soon, or at all.
Last week we had the Judicial Review brought by a number of large freeholders, the outcome of which is likely to be known in about September. If the freeholders win, that will likely be that. If the Government wins, the freeholders have already made clear that they will be appealing to the Supreme Court and, if necessary, Strasbourg.
Even if the Government wins all of the appeals, it will most likely be 2029/2030 by the time reforms are enacted. | |
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| Conveyancing Help on 14:55 - Jul 22 with 426 views | Ryorry |
| Conveyancing Help on 14:52 - Jul 22 by Zx1988 |
At this point I wouldn't hang my hat on any of the unenacted bits and pieces either being enacted any time soon, or at all.
Last week we had the Judicial Review brought by a number of large freeholders, the outcome of which is likely to be known in about September. If the freeholders win, that will likely be that. If the Government wins, the freeholders have already made clear that they will be appealing to the Supreme Court and, if necessary, Strasbourg.
Even if the Government wins all of the appeals, it will most likely be 2029/2030 by the time reforms are enacted. |
Personally, I'd never buy leasehold, but understand the OP'S position that he's buying the place he's currently living in, which exerts a pressure of its own I guess. |  |
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| Conveyancing Help on 15:46 - Jul 22 with 332 views | DJR |
| Conveyancing Help on 14:38 - Jul 22 by Zx1988 |
More than happy to help - I'm a surveyor and registered valuer, specialising in leasehold property.
First, I'm going to assume that the property you're buying is a flat? Let me know if it's a house, as they come under an entirely different regime.
The 'non-collection' clause in respect of the ground rent sounds interesting - are you able to post the wording of the clause here? If the ground rent simply cannot be collected by the freeholder, under the terms of the lease, it would feel as if it's a non-issue.
Otherwise, I can envisage that there are a couple of potential issues here:
If the ground rent will increase above £250 per annum during the course of the lease (and you are not situated in Greater London), the lease will convert into an Assured Shorthold Tenancy. The issue here is that, under an AST and the Rent Act 1988, if the rent then goes unpaid for three months, the freeholder can apply to a Court for a mandatory possession order. There is no mitigation, and the Court must grant possession. Lenders don't like this, as it means that they can lose their security over a debt of a few pounds.
Second, if the rent is (or will increase) above 0.1% of the value of the property, it can be classed as onerous and lenders won't like it.
Finally, lenders also get twitchy if the rent increases too much, too frequently, or by amounts that are difficult to ascertain.
If any of these three issues apply, then lenders generally won't lend without either a Mortgage Protection Clause (in the event of the first issue), or a Deed of Variation. Freeholders are under no obligation to provide either.
Assuming this is the issue, the fix is to extend the lease under the provisions of LRHUDA 1993. This entitles you to an extra 90 years on the lease (which you may or may not need) and, most importantly, the ground rent to be reduced to a peppercorn (the legal/contractual equivalent of nothing). The freeholder cannot (except in a few very limited circumstances) refuse a lease extension.
My advice would be to ascertain the likely cost of extending the lease, and re-offer on that basis.
More than happy to answer any other questions you might have, either here or via PM. |
It's a long time since I practised conveyancing but the following (whilst correct) seems totally counter-intuitive.
"If the ground rent will increase above £250 per annum during the course of the lease (and you are not situated in Greater London), the lease will convert into an Assured Shorthold Tenancy. The issue here is that, under an AST and the Rent Act 1988, if the rent then goes unpaid for three months, the freeholder can apply to a Court for a mandatory possession order. There is no mitigation, and the Court must grant possession. Lenders don't like this, as it means that they can lose their security over a debt of a few pounds."
Presumably this has become an issue with greedy freeholders seeking to maximise income and make blocks of flat more attractive as an investment..
Do you know if this was an outcome that was intended, or is just an unexpected consequence of the interaction between the 1988 and 1989 Acts?
I do not know the ins and outs of this but I do wonder if there might have been a simple legislative tweak to the interaction between the 1988 and 1989 Acts that might have nipped this issue in the bud, without preventing increased ground rents, which I believe are now are no longer possible?
Having said that, I have been involved in drafting legislation and know that fixing things that might be of benefit to those in practice (and their clients) take a much lower priority than "sexy" political stuff. And I suppose there are competing interests here.
[Post edited 22 Jul 15:49]
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| Conveyancing Help on 15:51 - Jul 22 with 316 views | Zx1988 |
| Conveyancing Help on 15:46 - Jul 22 by DJR |
It's a long time since I practised conveyancing but the following (whilst correct) seems totally counter-intuitive.
"If the ground rent will increase above £250 per annum during the course of the lease (and you are not situated in Greater London), the lease will convert into an Assured Shorthold Tenancy. The issue here is that, under an AST and the Rent Act 1988, if the rent then goes unpaid for three months, the freeholder can apply to a Court for a mandatory possession order. There is no mitigation, and the Court must grant possession. Lenders don't like this, as it means that they can lose their security over a debt of a few pounds."
Presumably this has become an issue with greedy freeholders seeking to maximise income and make blocks of flat more attractive as an investment..
Do you know if this was an outcome that was intended, or is just an unexpected consequence of the interaction between the 1988 and 1989 Acts?
I do not know the ins and outs of this but I do wonder if there might have been a simple legislative tweak to the interaction between the 1988 and 1989 Acts that might have nipped this issue in the bud, without preventing increased ground rents, which I believe are now are no longer possible?
Having said that, I have been involved in drafting legislation and know that fixing things that might be of benefit to those in practice (and their clients) take a much lower priority than "sexy" political stuff. And I suppose there are competing interests here.
[Post edited 22 Jul 15:49]
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I think it's probably an unintended consequence.
I imagine the Acts were a little while in the conception and drafting and, certainly in the early 1980s, ground rents were generally nominal sums, rather than the saleable income streams that they become from the 1990s onwards.
It is envisaged that the eventual passage into law of the Renters Rights Bill will serve to resolve this issue, but that will all be dependent upon the Bill passing into law, and doing so without legal challenge. | |
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| Conveyancing Help on 16:04 - Jul 22 with 294 views | DJR |
EDIT: this was meant to be a response to your post about not liking leasehold, which I agree with.
In the 1980s, a lot of two-bedroomed houses were built, and if it were me, I'd opt for one of those rather than a two-bedroomed flat. I even came across a one-bedroomed house when I was looking for my first property.
My first two properties (in London) were two-bedroomed houses, and one area where an awful lot were built was Rotherhithe which is pretty close to the City.
Looking at Rightmove, they seem much cheaper than two-bedroomed flats in the Bermondsey/Rotherhithe area. Admittedly, they might look a bit dated outside (in contrast to a new flat) but they are low maintenance and don't come with service charges. And Rotherhithe is well served by Canada Water on the Jubilee line. [Post edited 22 Jul 16:25]
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| Conveyancing Help on 16:04 - Jul 22 with 293 views | Ryorry |
| Conveyancing Help on 15:51 - Jul 22 by Zx1988 |
I think it's probably an unintended consequence.
I imagine the Acts were a little while in the conception and drafting and, certainly in the early 1980s, ground rents were generally nominal sums, rather than the saleable income streams that they become from the 1990s onwards.
It is envisaged that the eventual passage into law of the Renters Rights Bill will serve to resolve this issue, but that will all be dependent upon the Bill passing into law, and doing so without legal challenge. |
Likely to pass into law sometime in September according to one good source. | |
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| Conveyancing Help on 17:08 - Jul 22 with 228 views | godalmingblue |
| Conveyancing Help on 14:38 - Jul 22 by Zx1988 |
More than happy to help - I'm a surveyor and registered valuer, specialising in leasehold property.
First, I'm going to assume that the property you're buying is a flat? Let me know if it's a house, as they come under an entirely different regime.
The 'non-collection' clause in respect of the ground rent sounds interesting - are you able to post the wording of the clause here? If the ground rent simply cannot be collected by the freeholder, under the terms of the lease, it would feel as if it's a non-issue.
Otherwise, I can envisage that there are a couple of potential issues here:
If the ground rent will increase above £250 per annum during the course of the lease (and you are not situated in Greater London), the lease will convert into an Assured Shorthold Tenancy. The issue here is that, under an AST and the Rent Act 1988, if the rent then goes unpaid for three months, the freeholder can apply to a Court for a mandatory possession order. There is no mitigation, and the Court must grant possession. Lenders don't like this, as it means that they can lose their security over a debt of a few pounds.
Second, if the rent is (or will increase) above 0.1% of the value of the property, it can be classed as onerous and lenders won't like it.
Finally, lenders also get twitchy if the rent increases too much, too frequently, or by amounts that are difficult to ascertain.
If any of these three issues apply, then lenders generally won't lend without either a Mortgage Protection Clause (in the event of the first issue), or a Deed of Variation. Freeholders are under no obligation to provide either.
Assuming this is the issue, the fix is to extend the lease under the provisions of LRHUDA 1993. This entitles you to an extra 90 years on the lease (which you may or may not need) and, most importantly, the ground rent to be reduced to a peppercorn (the legal/contractual equivalent of nothing). The freeholder cannot (except in a few very limited circumstances) refuse a lease extension.
My advice would be to ascertain the likely cost of extending the lease, and re-offer on that basis.
More than happy to answer any other questions you might have, either here or via PM. |
Cheers for the response.
Technically we're a house but it's in a building which has been converted into 6 properties, 2 houses and 4 flats.
The terms of the lease set the monthly payments to double every 25 years, there's over 900 years left on the lease, the lease is held by the owners of the 6 properties and currently managed by one of the owner occupiers.
My solicitor has asked for the rent to be changed to a peppercorn rent, which is currently in the process of being completed, but my issue is that the selling solicitor Sat on this request for around 7 weeks, whilst I was paying rent to his client.
It seems like there's not a lot that can be done about the delay and I've just got to such up the delay / extra cost! | | | |
| Conveyancing Help on 17:13 - Jul 22 with 216 views | godalmingblue |
| Conveyancing Help on 14:55 - Jul 22 by Ryorry |
Personally, I'd never buy leasehold, but understand the OP'S position that he's buying the place he's currently living in, which exerts a pressure of its own I guess. |
I'd never normally look at leasehold, but I really didn't want to move house at the moment and it was the easiest way to get that 1st step onto the housing market.
Plus the lease is held by the owners of the properties so decisions regarding increases etc will happen between us not a landowner just taking a profit from us. | | | |
| Conveyancing Help on 18:31 - Jul 22 with 154 views | redrickstuhaart |
| Conveyancing Help on 17:08 - Jul 22 by godalmingblue |
Cheers for the response.
Technically we're a house but it's in a building which has been converted into 6 properties, 2 houses and 4 flats.
The terms of the lease set the monthly payments to double every 25 years, there's over 900 years left on the lease, the lease is held by the owners of the 6 properties and currently managed by one of the owner occupiers.
My solicitor has asked for the rent to be changed to a peppercorn rent, which is currently in the process of being completed, but my issue is that the selling solicitor Sat on this request for around 7 weeks, whilst I was paying rent to his client.
It seems like there's not a lot that can be done about the delay and I've just got to such up the delay / extra cost! |
Correct. The other side's lawyer owes no duties to you (broadly speaking). | | | |
| Conveyancing Help on 20:05 - Jul 22 with 79 views | DJR |
| Conveyancing Help on 17:08 - Jul 22 by godalmingblue |
Cheers for the response.
Technically we're a house but it's in a building which has been converted into 6 properties, 2 houses and 4 flats.
The terms of the lease set the monthly payments to double every 25 years, there's over 900 years left on the lease, the lease is held by the owners of the 6 properties and currently managed by one of the owner occupiers.
My solicitor has asked for the rent to be changed to a peppercorn rent, which is currently in the process of being completed, but my issue is that the selling solicitor Sat on this request for around 7 weeks, whilst I was paying rent to his client.
It seems like there's not a lot that can be done about the delay and I've just got to such up the delay / extra cost! |
Perhaps some of the financial pain will be eased by not having to make mortgage payments.
And I suppose it's just possible there could be other reasons for the delay such as the seller having a related purchase.
I assume (perhaps wrongly) that you will have to pay the legal costs of the seller's solicitor for the amendment of the lease, so the only suggestion I have to speed things up would be to offer to pay them a little more. [Post edited 22 Jul 20:20]
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