Freehold purchase with flats

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    #16
    Opps, here it is:
    So I'm in the process of buying a detached house consisting 2 maisonettes I will be the owner of the freehold for the whole property (100% building and land) and living in the 1st floor flat. There are 2 leases of the same length: The ground floor flat has a lease for the ground floor and all the land

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      #17
      If the lease requires them to replace it, they would be jointly and severably responsible, which basically leaves you with an unresolved dispute as to who should pay.

      For BtL tenancy agreements (which are legally leases), landlords tend to want to have all the adult occupiers named, as they can chase any of them for the debt. There also seems to be a tenancy to what should room only student HMOs as joint tenancies, so that any of the students can be pursued for debts and compensation.

      Comment


        #18
        As a freeholder you will inherit significant legal obligations in accordance with the leases and statutory legislation. However, provided you meet your obligations including arranging maintenance, insuring the premises etc. there is arguably no reason to be overly apprehensive about taking on the role.

        You will be able to recover your costs via service charges as outlined in the leases. Where there are issues you will be in a position to unilaterally take action; and will retain greater control in your own life since you will not need another’s consent to, for example, undertake alterations. Conversely the other leaseholder would require your consent for alterations not allowed for in their lease which again presents you with greater control in your own life since they might want to do something you would not be happy with.

        I would think carefully before going into ‘partnership’ with an unknown that may possess very different ideas to your own. It is potentially more problematic to resolve matters where leaseholders are also jointly the freeholder.

        Bear in mind, even as joint freeholder, the legal obligations still exist.

        Furthermore, you don’t know the leaseholder wants to take a share of the freehold. They may be perfectly happy not to take on the responsibility.

        You will find helpful information on the LEASE website.

        Comment


          #19
          Thank you vmart for a great reply.
          Unfortunately there is no service charge payable but I get your meaning.

          What I was thinking is to try and protect myself against a catastrophic loss.

          As I see it, I am the 100% freeholder but if the building were to be lost and the insurance did not pay out I would HAVE to replace the building out of my own pocket and I simply don't have the money. As the ground floor flat and the gardens are leased to the ground floor lessee I cannot sell or mortgage the land to fund a rebuild! (as you could with a normal house)

          This would be a bankruptcy situation. Of course I would still have the freehold but it is worth virtually nothing.

          I was thinking that in giving away 50% of the freehold it would somehow help protect me - maybe as joint freeholders we would find a way forward.

          I suppose the big question is whether it is realistic to assume that the insurance may not pay out?

          Am I worrying about nothing?

          There are a couple of clauses in the lease that could potentially help me but I don't fully understand how they work. I will post pictures of them for comment.

          Cheers,
          John

          Comment


            #20
            Dear John

            In brief, the clause requires the freeholder to take out buildings insurance with a reputable insurer for the full reinstatement value that must meet the requirements of the Council of Mortgage Lenders. It provides latitude for the freeholder to insure against any other risk in connection with the buildings. If there was not a recent reinstatement valuation it would be a good idea to arrange one to be undertaken by a RICs qualified surveyor.

            The other clause prevents the parties doing anything that voids or renders the policy voidable or increases the premium.

            SERVICE CHARGES
            The leases may not use the term ‘service charges’ but there will be provision in the leases (unless they are defective) for the freeholder to collect service charges in relation to the proper maintenance and management of the building. This will include insurances, fire risk assessments, asbestos management surveys and other legal obligations of the freeholder.

            The best thing to do is to take professional advice in relation to your concerns and interpretation of lease clauses.

            Comment


              #21
              Thanks again, I appreciate your effort and time and take your point about seeking professional advice. I do like to try and do my own research and have my own understanding of things and this is why I'm asking you guys these questions, many minds are better that one :-)

              I did get the gist of most of the clause in the first picture but was unsure about the bit after the AND, I think it is basically saying that if any the lessee cannot enjoy their property because of damage that was not their fault then no or a reduced rent is due. However I don't know why this seems to be restricted to insured damage only?

              The clause in the second picture seems to suggest that if a lessee causes the insurance to be invalid (or inadequate) then they are in breach of the contract. However it goes on to say about putting it right by them paying any increase in premium. However in the event of a catastrophic loss what use is an increase in premium?

              If the above means that the lessee is indeed in breach of the contract (by causing the insurance to be void), does this mean that the lease is void and the property reverts to the freeholder (if the insurance is made void by the lessee)?

              There is no fixed annual service charge stipulated in the lease but there is a clause that says each party will pay 50% of the costs incurred by the landlord in carrying out their duties. e.g. insurance and maintenance so this bit is fine and is as mentioned above.

              Cheers

              Comment


                #22
                The lease is only void if:

                1) The freeholder gets a ruling from the FTT that there has been a breach; abd

                2) The freeholder then issues a notice of forfeiture; and

                3) The leaseholder either doesn't seek relief from the courts or the courts don't grant relief.

                In practice, the courts will grant relief on the basis that the leaseholder pays the freeholder's losses, and, if they fail to do that, on the basis that the leaseholder must sell the leasehold interest and compensate the freeholder from the proceeds

                Comment


                  #23
                  Thanks leaseholder64 that is very useful information.

                  So a couple of hypothetical situations: and I will make LOTS of assumptions that are most probably wrong.

                  Lets say that I have perfectly good freeholder buildings insurance.

                  The ground floor flat takes down a supporting wall without consent and the place falls down.
                  I think they are in breach of the lease. I appeal to the FTT that there has been a breach and it is accepted.

                  1) If this is covered by my insurance:

                  I assume in this case the court might grant relief as the damage is covered, the property gets rebuilt and the leaseholder gets to keep his home but would be liable for any increase in insurance premium under the terms of the lease.


                  2) It is not covered by my insurance:

                  The court could grant relief on the basis that the leaseholder sells to try and cover my losses. If there is a mortgage I assume that would be paid first. Whether there is a mortgage or not, I very much doubt that the sale would cover the re-building cost. Would this be a case where the court may not grant relief? I assume that I have the right to appeal?

                  If the court did not grant relief, the lease would be void and the property would revert to me. In this case, if there was a mortgage, would I be liable for the mortgage or would the lessee still be liable for the mortgage?


                  Have I got the gist of it or...

                  Cheers

                  Comment


                    #24
                    leaseholder64
                    Sorry to bump this,
                    Do you think the above is about right? Please feel free to comment.
                    Cheers

                    Comment

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