Buyer Requesting Indemnity Insurance - Ground Rent

[NervousBuyer2021]

Just wondering if anyone else has come up with this issue and how it was resolved. We are selling our new build flat and all seems to be progressing fine but we have had a request come via the solicitors that we weren't expecting.

The rent review provisions have been flagged as an issue and while their mortgage has been approved, the lender now requires either a variation to the lease to include a clause saying the ground rent will never exceed £1,000 or an indemnity to 'protect from the provisions of the Housing Act 1988 and the lease being regarded as an AST'.

If we try to vary the lease that is likely to take months and we would have to pay the legal fees.

The indemnity policy is going to cost close to £1k.

So the indemnity policy seems to be our only option but it's a cost we weren't expecting and it is frustrating that it wasn't an issue for our mortgage or for others selling in our block in recent months.

Any advice would be very welcome!

Could you pull out and remarked the flat?

Has your own solicitor not explained the need for the indemnity insurance?
What are they advising?

@MadeForThis

Could you pull out and remarked the flat?

We are quite far down the line with this one - had thought we’d be exchanging next week and then got a lot of queries through today including this one.

@FlowerArranger

Has your own solicitor not explained the need for the indemnity insurance? What are they advising?

Our solicitor has recommended the indemnity now that the issue has been flagged by our buyer’s solicitor. But this wasn’t an issue for anyone selling recently in our block, so thought I’d see if anyone has come across this before and come up with another solution.

It’s frustrating but bottom line is that is what the lender requires, and you have zero chance of persuading them otherwise.

So your buyers can find a different mortgage, pay for the indemnity insurance themselves, or you can pay for the insurance.

Talk to your lawyer for advice, it really depends on your overall negotiating position what you should do here. Eg are you in a hurry/complicated chain? Have prices in your area gone up or down since you agreed this sale? How committed do you think the buyers are? Lots to think about.

Yes it seems we’ll have to go ahead with it - we want this sale to go ahead really and it could come up again for any future buyer I suppose.