Buyers pulled out just before exchange- is there anything we can do???

[biscuit13]

Long story short, we currently own a 2 bed flat which we did help to buy, we want to use help to buy again to buy a house so need to complete before end of march next year.
We put out flat up for sale in August and got an offer after just 10 days, cash buyers. Everything was proceeding so we reserved our new house and started legal proceedings with that.
After 2 months the buyers decide they don't like the fact they have to pay ground rent, which was on the original advert and is only £250 a year. They asked for a deed of variation to change the lease otherwise they would pull out!?, after some back and forth we got a response from the people who own the building that a deed of variation would not be necessary because of government regulations already in place. Perfect answer!.....
Buyers then still decide to pull out of the sale, 9 weeks into it.
So we are left desperately trying to find a new buyer.
Weve been given just over 1 week otherwise we will lose our new house, and also be left with about £4k worth of legal fees to still pay, all for nothing.

Is there anything we can do?! We are about to lose everything because our buyers screwed us over for no reason whatsoever. its causing ALOT of stress and we also have our 1st baby due in 5 days!! So this house stuff is the last thing we need to be starting again with now! We thought we would atleast have exchanged by the time baby came.

Similar thing happened to me a couple of years ago. Cash buyer, took 4 months conveyancing, me paying out 100s of pounds only to get to the stage where we were due to exchange and they backed out. Due to lease issues. My ground rent is 150 a year BUT then I researched it and realised that leasehold is a bit of a nightmare really. Your buyers solicitor will have no doubt told your buyer to walk away. Mine did - and that's at 150 a year. The issue is the lease. Google leasehold scandal. Mine is now being rented out. Keep positive though as reform is coming hopefully. Another poster is right though it's new houses where current reform is coming. Hopefully for flats and existing leases change may be on the way too but it won't happen overnight.
I was like you - furious with my buyer for messing me around. But actually they are stopping themselves being saddled with a property they may struggle to sell in future.

@Japanesejazz

Unless you are in London, your ground rent is a big issue

Baloney - on what are you basing that blanket statement?

When we owned our flat we had ground tent and service charge (Hampshire). We didn't have an issue when buying, and this didn't prove to be an issue with selling although I'm aware our service charge was high (approx £120 per month).

You can't move these days for hearing horror stories about ground rent, especially with 'Help to Buy' properties. I'm sorry but I'm not surprised they pulled out, and I'd steel myself for an uphill struggle, were I you.

Sorry OP, it’s so rubbish, the whole system!
I had this happen to me twice!
Both on exchange day when selling the same flat. In both cases, no information or reason was given, they just went AWOL!

You could apply for a statutory lease extension to extend your lease by 90 years. This reduces the ground rent to nil in effect (legally called a peppercorn rent, but I am yet to meet a freeholder who demands that they have their peppercorn) this would probably be the easiest way. You would be liable for your legal fees and premium of the lease extension and also the freeholders legal fees and valuation fees.

Thank you everyone, so just some extra info our lease is 999 years and we are only 2 years in. Does that make a difference??

@biscuit13 in house buying there’s always a risk. But perhaps rethink what you’re doing if it’s wiped out all your savings.....you’re stating it’s cost in the region of £4K with this buyer pull out. Surely you need a better safety net with buying a house?

Baloney - on what are you basing that blanket statement?

I’m assuming the poster is referring to the fact that once the ground rent exceeds £250 anywhere in the country, (outside London, where the threshold is £1,000) it becomes what is legally known as an ‘assured tenancy’.

According to the 1998 housing act, an assured tenancy gives the landlord increased rights to repossess the property, should the owners fail to pay the ground rent. There is no requirement in law for the landlord to alert the mortgage lender of their plans to repossess the property. The act is also mandatory, meaning the court cannot refuse the landlords request.

So even though £250 might sound like quite a low amount (and divided over the year is probably more than affordable for most households), it represents a huge risk to lenders. In most cases, if we don’t pay our mortgage, the bank will just take our house. In the case of an Assured Tenancy, the bank doesn’t necessarily have that option, because the landlord is automatically ‘entitled’ the house once ground rent has not been paid for 3 months.

@biscuit13

Thank you everyone, so just some extra info our lease is 999 years and we are only 2 years in. Does that make a difference??

As long as you have owned the property for more than 2 years you can get a statutory lease extension. At that length of lease the premium for the extension is going to be small, very small. It will be legal fees for each party that will be the biggest expense. Probably 1-2k each party and you have to pay for both.

@NJool yes most, we do have more than that in savings, just over double, but we're hoping to not just throw it away for nothing.
@ramblingsonthego Would it be worth an extension if its already at 997 years?? We were told when we bought that because it was so long, I assumed the longest lease you could get that there wouldn't be any problems selling.

@biscuit13 only if you wanted to get rid of the ground rent component. Not from a lease length point of view.

@YouLikeTheBadOnesToo thank you, I understand all that now, thats been really useful. I think we are a bit more prepared, if we manage to find another buyer, to tackle this again as it probably will come up again.

If you're buying a new build, would your builders consider part exchange?

@imabusybee I think we are going to ask the question, no harm in asking!

As YouLikeTheBadOnesToo explains, the reason for questions from myself & Japanesejazz is because of the consequences of ground rent above £250 outside of London. Solicitors don't always understand / know this.

In addition to what You sets out (that's the key risk - forfeiture ), you would normally have a right of first refusal if the landlord decided to sell the freehold, but you don't have that right with an assured tenancy.

As others have said, there are things you can do to vary the lease but you probably need to get that process underway because I don't think you'll get another buyer with the ground rent as it is.

@biscuit13 they won't be able to part exchange if you are using help to buy. They aren't allowed to do both.

I'm really sorry you are going through this. I still have irrational hatred towards to the prospective buyers of our house last year, completely irrational on my part as they technically did little wrong, but you feel like your whole future is in these random people's hands.

@Africa2go I dont mind the questions this is helping a lot more than the solicitors have (they never explain anything?!)
So we did actually get an option to vary the lease which was quite reasonable (about £1k) and we buyers didn't want to go with that option. But it basically said it puts in a variation to say that the landlords can't seize the property under the 1998 House act. Do you think it would be worth doing that before we find another buyer or wait and have that as a back pocket type thing?

@movingagain20 ah right, thats annoying. Thats exactly how we felt, they basically hold all the cards and we are dependent on them being decent people.

Oh OP so sorry to hear this. Same thing happened to us a few years ago, the buyer pulled out on day of exchange. I was so upset and to be honest I still am if I think about it too much!
In hindsight though it did us a favour because although it was a very expensive experience, we ended up waiting to move for another year or so and ended up getting more house for our money in a better location. I don't necessarily believe it fate but I do think that it will work out okay in the end.

@biscuit13 that kind of variation would be a start and protect you/the lender against forfeiture (depending on the terms and it's ability to bind future landlords / freeholders and protect successive leaseholders), it doesn't address the other consequences (it's the Housing Act 1988 by the way, not 1998 just to be pedantic ).

Buyers would still have the uncertainty of what the payments would be for the ground rent (it wouldn't double every 10 years but may do every 20-30 years maybe) and finding a mortgage company that's prepared to give them a mortgage. Buyers are put off by the (adverse) publicity about leasehold so as soon as their solicitor points out the clause about increasing ground rent they'll just walk away.

Its not something a forum can advise you on - get your solicitor to give you thorough advice about this, what it might mean in terms of selling your flat (impact on value?) and the costs involved of resolving it - getting the statutory lease extension (with peppercorn ground rent) or a deed of variation freezing the ground rent / reducing it to a peppercorn.

@biscuit13 Hi OP! Wondering how you sorted this please? Currently going through same issue. TIA.

At present it's nearer 25%. Ea's often think it's 1 in 3, but it seems that 1 in 4 is more normal.