Lost sales because of high ground rent charges?

Hi, Folks, Over the last few years I have sold most of my rental properties situated in the suburbs of Birmingham. I am now left with two, twenty year old apartments in the same building which are both up for sale.

The ground rent had its ten year review last year calculated under the price index system and rose from £274 to £410 a year, which is higher than most apartments in the city centre of Birmingham. Consequently, I have lost two sales as the buyers’ lenders refused to lend.

Having done intense research over the last weeks, I find that ground rent over £250 per annum triggers an AST agreement between the resident and the freeholder. To be clear: if the resident missed ground rent payments, the freeholder can evict the resident under a Section 8, meaning that both the resident and lender would lose money.

Why an owner of a flat would stop paying their mere £410 a year ground rent (as opposed to their £2,000 service charge) is beyond me but this is the clause lenders are concerned with.

So I’m very annoyed that neither my selling agents or my solicitors picked up that this may be a problem when I first gave them the figurework for the flats.

I have found three ways to mitigate the problem:
1) The freeholders could give a promissory document saying they would not evict a resident for non payment of ground rent (but why would the freeholder do that?)
2) Get a Deed of Variation which is very expensive and can take months to complete and the freeholders do not have to agree with it
3) Take out an Indemnity Policy which is inexpensive and quick.

I having spoken to my freeholders and they will not write the letter and will not accept a Deed of Variation and are even asking for proof that I’ve had two sales fall through because of the ground rent charges.

So, my question to you lovely people is do you know of a solicitor who deals in indemnity policies that cover ground rent charges as I have googled it to death and cannot find anyone and all anyone says is find a cash buyer! But I can’t see how this would mitigate the problem for the buyer anyway.

It’s annoying that now new build flats are exempt from ground rent charges but they are still in place (seemingly with no regulation) for older flats.

Sue