Insolvent company

[Beingwomen]

Dear All,

We are first time buyers and we have offered to buy a Flat with lease remaining 970 years. We are at the final stages of the transaction and we have received the below email from our solicitor recently. We are not familiar with the terms such as 'insolvent company', 'indemnity policy' etc.,

Please can you provide your advice on this. Is it safe to buy this property? Whether it is the usual scenario. If we decide to sell the property in the future - will it be problematic?

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I have now received further replies from the vendor’s solicitors and note the Landlord/Freeholder is an insolvent company and is classed as “absent”

In this instance the vendor’s solicitors have provided a draft indemnity policy in this respect, and I have reported to your Lender with the policy for approval

Once we hear back from Lender and if they are happy to proceed, we can start to discuss a completion date.

Should we negotiate the price if the lender agrees to Lender to Lend our mortgage with indemnity policy? Please help and advice.

Why don’t you ask your solicitor for an explanation rather yah a randoms on the internet?

An insolvent company is one that is unable to pay its debts and may have ceased to exist. The effect of this is that the seller cannot prove that they are up to date with ground rent payments - in all probability, no ground rent has been collected by the landlord for several years.

The indemnity policy is an insurance policy that will pay out if the landlord or their successor reappears and makes a claim against you for the unpaid ground rent. The policy provides permanent cover - it does not need annual renewal, so you will not be asked to pay any premiums.

This is not uncommon. It is unlikely to be an issue when you sell other than that you will have to provide an indemnity for the buyers in the same way that the current owners are providing an indemnity for you.

If you have already agreed the price, it is unlikely you will be able to renegotiate it on this basis. The indemnity is all you need.

Yes you need to ask your solicitor to explain this properly. It sounds like the owner company has gone into liquidation. This means that a liquidator (usually a court appointed official) has taken over the company. They have power to sell the assets but they just don’t know enough about the property to answer all the questions you need to know about. So for example you’d normally ask if any alterations have been made to the property. If yes the seller would provide details to satisfy you that it had all been done in accordance with relevant regulations and planning permission requirements. Because the liquidator doesn’t know you will need an indemnity policy - if it turns out there was an alteration that didn’t have building control approval and it will cost £10k to fix , that policy will pay out the £10k. However you do need to get your solicitor to explain all of this and go over the exact terms of the indemnity being offered.