Downsizing BTL portfolio and falling foul of non-qualifying lease conditions?
I am in the process of downsizing my BTL portfolio (2 long leasehold flats and 1 freehold house), which I own alongside my other half (tenants-in-common 99% in their favour). We also have a house (principal private residence).
Somewhat belatedly, I have discovered that I fall foul of the clause that prevents me from classifying the flats as “qualifying leases” due to the number of properties we owned in 2022.
Has anyone had any successful experiences of selling non-qualifying leasehold properties where you fall foul of the “number of property conditions” and nothing else?
Specifically:
1) Is there any form of insurance (indemnity or otherwise) that can be purchased as part of the seller’s pack to lessen the anxiety of any potential buyers?
2) Does having an ESW1 form help with the marketability/sale of the property (even though it is a non-qualifying lease)? Both flats are brick-built with no cladding.
3) Having spoken to 3 estate agents, they seem to suggest that this will not impact the sale price/marketability of the property. This seems counterintuitive, have you had to take a deep haircut in price to sell a non-qualifying lease property post offer stage?
4) Finally, are there any “cash buyer” type firms you would recommend? For the ones you do recommend, did they revise their initial offer as part of their conveyancing process?
Thanks in advance
AJ
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New tenancy agreement or addendum to old one in Scotland?
Member Since February 2011 - Comments: 3453 - Articles: 286
9:16 AM, 6th August 2025, About 9 months ago
A lease won’t qualify for zero ground rent (under the 2022 Act) if:
It’s not a newly granted lease (post-30 June 2022); or
It was a shared ownership lease where the tenant hasn’t staircased to 100%; or
The lease was voluntarily extended before the 2022 Act came into force, and ground rent remained.
However, you mention that you fall foul due to the number of properties you owned at the time—this implies your lease extensions triggered the business landlord exemption (Schedule 1, para 2(1)(b)).
So even if you’ve extended the lease, the lease remains non-qualifying, meaning:
The lease can still include a ground rent above peppercorn.
Buyers may be wary, particularly if the ground rent is escalating.
There’s currently no indemnity policy I am aware of to override the business landlord exemption or “convert” a non-qualifying lease.
But you can consider:
Legal Expenses Insurance for the buyer (rare and case-specific) if buyer’s solicitor is concerned about enforcement or future changes in the law.
Ground Rent Indemnity (if there’s doubt about enforceability or terms) — this is usually only relevant if there’s ambiguity over increases or doubling clauses.
Concession Letter or Deed of Variation from the freeholder reducing ground rent to a peppercorn—this would create a de facto “qualifying” lease and dramatically help saleability (but you’d need the freeholder’s agreement).
Member Since November 2013 - Comments: 65
12:19 PM, 6th August 2025, About 9 months ago
Reply to the comment left by Neil Patterson at 06/08/2025 – 09:16
I don’t believe the question relates to Ground Rent.
Post Grenfell, ‘they’ discovered that many LH buildings (ie building owned by freeholders, but with flats “sold off” as LH property) had SERIOUS building (fire) defects. Because the government didn’t want to pay for this, they devised a scheme to avoid liability (or paying for remediation).
This basically carved out cohorts of ‘victims’ that would be liable for the cost of remediating BUILD-TIME defects.
One of these was to say that anyone who owned 3 or more properties on 14th Feb the previous year would be excluded for protections on all their properties (whether they needed remediation or not) – and that this non-qualification would remain “in perpetuity” to prevent a LH selling to someone else who might be otherwise be protected. There’s a bunch of other criteria that exclude other leases as well.
Anyway, as is now becoming increasingly obvious, there are a load of otherwise safe properties, but because of an arbitrary classification, the LH remains non-qualifying ‘forever’, meaning that there is the potential for any new LH to have to pay for as-yet-undiscovered defects related to the property.
This all arises because LH are liable for ‘maintenance’ of the freeholders building.
Why a rectifying ‘fire breaks’ or ‘compartmentation’ or ‘cladding’ that was either omitted, or doe badly, or with materials KNOWN to be defective at the time of the build should be classified as ‘maintenance’ is a mystery to me.
Member Since October 2013 - Comments: 1642 - Articles: 3
3:36 PM, 6th August 2025, About 9 months ago
Reply to the comment left by Shining Wit at 06/08/2025 – 12:19
I agree that’s the problem for the seller. I was below the level before the rule came in, and wouldn’t have had to pay for any safety remediation on the flat, but the developer stumped up for the work anyway (quite right). Otherwise, I would have had to pay a significant sum towards the work.
We now have our EWS1, but the market for flats with existing leases and ground rents is bad. It seems all flats are being tarred with the same brush, EWS1 or not, and lenders still aren’t lending.