CLS Property Insight has announced the launch of its Estate Rent Charge policy. This new policy is designed to facilitate the conveyancing process for properties within developments that have an estate rent charge, created after the Rentcharges Act 1977.
The policy offers protection to lenders against financial losses that may occur if a rentcharge lease is registered at a property due to the borrower’s failure to pay the rentcharge. This situation may arise when the borrower defaults on their mortgage, and the lender takes possession, only to find the property’s value has diminished because of the registered lease.
This Estate Rent Charge policy presents an alternative to obtaining a Deed of Variation, which would waive the rights of remedy under the Act but could potentially involve higher costs due to the rentcharge owner’s legal fees.
Chantelle Wren, Cert CII, associate director, underwriting at CLS Property Insight, commented on the new policy: “Where an estate rentcharge remains unpaid for a period of 40 days, the owner of the estate rentcharge has rights, as set out in Section 121 of the Law and Property Act, to enter their interest in the property by registering a statutory lease on the property. This could result in the property being unsaleable.”
Wren further explained: “Our Estate Rent Charge policy is available where the estate rentcharge has not been paid or where the rentcharges are paid and up to date, but where the lender requires protection in the event the borrower doesn’t pay throughout the term of the mortgage.”
