Deed of Variation
Mortgages, Re-Mortgaging, Equity Release, House Sales and Deed of Variation
Living in Central Fernwood and thinking of changing your mortgage, equity release or selling your house, then you may be affected by your Title Deeds and the Service Charge and need a Deed of Variation that will apply to your “Transfer of Part” known as a TP1
The majority of the properties on Central Fernwood pay FirstPort for the maintenance of the open spaces, called the “rentcharge”. When you bought your property, it had a Title Deed bundle that included a section called the TP1. This is VERY IMPORTANT as it includes the definition of how the “rentcharge” affects you. It protects you, your buyers lender and FirstPort if you default on payments to FirstPort or your mortgage
When talking about a rent charge, it’s important to understand that although the TP 1 says fixed and variable rentcharge, what it is identifying is estate rentcharge (covering the cost of maintaining shared things). In the case of Central Fernwood, the public open spaces.
At present, the land owner of the open spaces within Central Fernwood is Barratt David Wilson Homes who have contracted FirstPort to maintain them.
Over the past few years, mortgage providers have become concerned that if the freeholder fails to pay their Service Charge (Estate Rentcharge), section 121 of the Law of Property Act 1925, can be implemented by the rent charge owner/rentholder (Firstport). This includes exercising rights of re-entry as specified in the Act and quoted in paragraph 9.2 of your TP1. The mortgage holders are concerned that, in such circumstances, under section 121(3) of the 1925 Act, the rentholder may take possession of the charged land and the income from it until the rent and all arrears, together with all costs and expenses caused by non-payment of the rent, are fully paid. In addition, under section 121(4) of the 1925 Act, the rentholder (Firstport) may grant a lease of the charged land to trustees, who must try to raise enough to pay the rent and arrears, together with all costs and expenses caused by non-payment of the rent. Any surplus must be paid to the owner of the charged land. Such leases are known as rentcharge leases.
Deed of Variation
Mortgage holders are usually willing to grant a mortgage if the house “Transfer of Part” (TP1) has been varied by a Deed of Variation in such a way as to protect them if the Freeholder defaults on the Service Charge. FirstPort has devised a form of words that is acceptable to most mortgage providers and is shown at the end of this article.
However, getting a Deed of Variation can be time consuming and expensive. FirstPort has a Deed of Variation team that will only deal with a legal expert acting on behalf of the Freeholder. It is recommended that a solicitor who is familiar with FirstPort and TP1s be used to complete FirstPort forms, supply a copy of your TP1 and pay the FirstPort fee which is currently £550 plus VAT. You, the Freeholder, will in addition be responsible for your own legal fees.
Who may need a Deed of Variation (DoV)?
When selling your property, your buyers mortgage provider may insist on a DoV;
When changing your mortgage provider, your new mortgage provider may insist on a DoV;
When entering Equity Release, the equity release company may insist on a DoV;
If you re-mortgage your property with your current mortgage provider, your mortgage provider may insist on a DoV if their rules have changed since you took out your original mortgage.