CLSQ has launched an Estate Rent Charge policy, designed to smooth the conveyancing process for properties on developments where there is an estate rentcharge created after the Rentcharges Act 1977.

The policy protects a lender against any financial loss it suffers following the registration of a rentcharge lease at the property in a situation where the borrower has not paid the rentcharge, defaulted on their mortgage and the lender has taken possession. It offers protection where there is a shortfall on the mortgage since the registration of the lease has devalued the property.

The Estate Rent Charge policy can be used as an alternative to seeking a Deed of Variation to waive the rights of remedy under the Act. This Deed of Variation, if agreed, may be more expensive than the insurance premium owing to the likely costs of paying for the rentcharge owners’ legal fees.

Chantelle Wren (pictured), associate director, underwriting, at CLS Property Insight, said: “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.

“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.”