MPowered Mortgages are the latest lender to update there P2 policy relating to leasehold. In a change to 5.14.9 the lender’s new requirements states:
“If the proposed security is a new, qualifying long residential leasehold property, covered by the obligations laid down in the Leasehold Reform (Ground Rents) Act 2022 you must check:
- that the ground rent is no more than “one peppercorn per year” or “peppercorn rent”; and
- that there are adequate provisions for repairs, maintenance, insurance etc. and an adequate maintenance charge.
If the proposed security is not a new, qualifying long residential leasehold property within scope of the Leasehold Reform (Ground Rents) Act 2022:
Peppercorn or low ground rents are acceptable.
In respect of RPI linked Ground rents:
- Ground rent is indexed to RPI no more frequently than every 5 years.
- Ground rent up to 0.1% of the current market value is acceptable. If the ground rent is over £250 (or £1,000 in London) or will end up over these figures in the future the property is unacceptable under the Housing Act 1988 In order to proceed a Deed of Variation eliminating this risk must be obtained prior to completion.
- We may accept Ground rent up to 0.2% of the current market value subject to review and where this is the case you should refer the matter to us to provide confirmation of whether we are happy to proceed,
In respect of Doubling ground rents:
- Should not double more frequently than every 20 years
- Ground rent up to 0.1% of the current market value is acceptable. If the ground rent is over £250 (or £1,000 in London) or will end up over these figures in the future the property is unacceptable under the Housing Act 1988 In order to proceed a Deed of Variation eliminating this risk must be obtained prior to completion.
- We may accept Ground rent up to 0.2% of the current market value subject to review and where this is the case you should refer the matter to us to provide confirmation of whether we are happy to proceed,
In respect of Fixed ground rent:
- These are acceptable up to 0.1% of the current market value. If the ground rent is over £250 (or £1,000 in London) or will end up over these figures in the future the property is unacceptable under the Housing Act 1988 In order to proceed a Deed of Variation eliminating this risk must be obtained prior to completion.
- We may accept ground rent of up to 0.2% of the current market value subject to review and where this is the case you should refer the matter to us to provide confirmation of whether we are happy to proceed
In respect of Open Market Value linked ground rents:
- These are not acceptable and should be referred to us as soon as identified
Where the management company is not owned by the homeowners covered by the estate rent charge, a maximum cap of 0.1% of the market value of the property, or £1,000, whichever is the lower applies. Increase mechanism limiting any rises to a government index measure for inflation (e.g., RPI or other similar index) is required for the case to be considered.
N.B. The ground rent and services charges combined must not exceed 1.5% of the property valuation.
Please refer back to us the amount and the nature of the estate charge. Please also refer to Section 5.15.2a”
Law firm with the relevant accreditation should take into account changes to leasehold requirements when updating their CQS Purchase of a Leasehold Policy.
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