Selling problems with leasehold flat
So I am in the process of selling my flat. We were told we were likely to exchange by mid April but yesterday found out my buyers lender are now refusing to lend because the ground rent will not be capped at £250. It’s currently £300 and has been since I purchased in 2021 - I don’t remember it being a problem then.
My solicitor has asked the freeholder for a deed of variation but says the only way around this is to extend my lease, which I’m led to believe will cost £10k+.
Has anyone else experienced this? I’m feeling like our plans to move are rapidly disappearing!
For reference (it’s a long one) this is the email received from the freeholder:
Dear Sirs,
Thank you for your email.
We are aware of the technical issue with ground rent in excess of £250 p/a and Schedule 2 of the Housing Act 1988. We do not accept that the issue is of real significance or acts as a bar to sale or lending if the protections available to the lender are properly explained.
Irrespective of whether the lease requires service of a Notice seeking Possession or advance notice before proceedings are issued on a lender, the lender is always entitled to be served with possession proceedings under Practice Direction 55A of the CPR 1998, and can at any time avoid mandatory possession by paying the outstanding ground rent into Court or to the Landlord under Section 138 of the County Courts Act 1984.
We do not see any realistic likelihood of Landlords using the Housing Act possession route instead of standard forfeiture to enforce rent arrears given the clear advantages of the latter, including recovery of costs. This is borne out by the lack of examples of such cases in the residential long leasehold sector to date. Furthermore, we have specific instructions from our client landlord not to pursue this type of possession proceedings.
Furthermore, The Renters (Reform) Bill, currently being debated in the Houses of Parliament would, if passed, prevent a tenancy of more than 7 years from being an assured tenancy.
We are of the view that there is no risk to a lender and that this point should not act as a bar to sale or lending. We therefore believe that any variation would be a waste of time and money and is not necessary.
As a reasonable landlord, and on the specific understanding that we do not believe this to be necessary, should you maintain that a variation is required, our client will offer to insert the following into the lease by way of variation:
The Landlord hereby confirms that it will not seek possession of the [property*] on the basis that this lease has created an Assured Tenancy under any of the grounds set out in Schedule 2 to the Housing Act 1988.
We are also able to insert:
Mortgagee Protection Clause
[Insert new sub-clause at the end of the landlord’s re-entry clause and renumber accordingly]
Before commencing any proceedings for forfeiture of this Lease, the Landlord shall:
Give notice of the breach to any mortgagee of this Lease of whom the Landlord has received notice pursuant to clause [[1] ]; and
If the mortgagee confirms in writing to the Landlord within 14 days of the notice that it wishes to remedy the breach, allow the mortgagee 28 days (or in the case of non-monetary breach only, such longer time as the Landlord may decide at its sole discretion) to remedy the breach.
In order to proceed with this, we will require:
Freehold OCE;
Leasehold OCE.
The fees payable will be HomeGround’s fee of £325 and our solicitor’s fee of £600 + VAT.
This is payable by undertaking to our solicitors upon completion and subject to increase should matters become protracted. Please do not attempt to make direct payment.
Once we have been provided the abovementioned documents, we will instruct our solicitors to contact you directly for a fees undertaking.
This offer is subject to contract and without prejudice.
Matters of this type typically take 4-6 weeks to complete from the date of instruction.
Please let us know how you wish to proceed.