Solicitor sent section 42 to wrong freeholder

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    Solicitor sent section 42 to wrong freeholder

    I have just bought a property which had (at the time of offer) a 71 year lease. I engaged two solicitors from the same firm; one for the conveyancing and one for the lease extension. I had the lease extension survey carried out and I thought everything was fine

    After completion we found out that the freeholders had changed identity and that my solicitor had sent the section 42 to the old freeholders who have said that it is invalid.

    My original survey suggested a sum of £13,000 for the extension. My freeholders are now offering an informal 125 year lease at an increased premium with rising ground rent (I don't know full details yet). People have warned not to do an informal route and wait 2 years

    My issue is with my solicitor. I feel that as part of the conveyancing they should have known about the change of identity. My solicitor is saying that it was reasonable to work on the knowledge provided by the vendors solicitor who was providing the incorrect freeholders name. I feel my solicitor should have checked.

    Any advise on what to do or if I have a claim against my solicitor.

    I am very stressed and upset about this.

    Thank you all in advance. I hope you can help

    CBH

    #2
    I presume you mean that the freeholder was replaced, rather than that they changed their name.

    The solicitors should have sent form LPE1 to the management company. I the management company filled that in incorrectly, the solicitor is unlikely to have checked with the Land Registry.

    Did the seller even know of the change? The freeholder was obliged to tell them, but might not have.

    Comment


      #3
      Hi leaseholder64 thank you for your reply. The freeholders transfered the ownership into a limited company. It was originally in their individual names, and then transferred into xxx properties Ltd.

      They are claiming that technically the section 42 was sent to the wrong freeholders as that is now the property company.

      I am unsure if the vendors knew of the change but I'm guessing not. My understanding is that the freeholders only have to inform the tenants of the change 30 days prior to any rent being due.

      I understand what you are saying about the LPE1, but if no check was made surely there may be a case of negligence?

      Thank you again in advance

      Comment


        #4
        Hi,

        I am not a solicitor and I am not sure who here is. I would start with the working assumption you might have a case. Whether you do or whether you can ever win justice in leasehold, who knows.

        There is a classic double bind afoot here. Buck passing too on face value.

        What the seller knew is irrelevant because they do not extend your lease, cannot fill in the LPE1 form themselves, and are mere chickens in the process. And your solicitor has to notify the freeholder of the assignment, not the seller's.

        As said above, what did the LPE1 tell you as to the freeholder given the leaseholder cannot complete it? Did you see this form? Who signed it off for the landlord/freeholder? It can't just be wrong on such a material fact and shrugged off given the consequences.

        You paid solicitors to (a) buy your flat and (b) to organise a lease extension. Two different but related issues.

        If they can't do these things correctly they are not worth their fee.

        How did the assignment (purchase) notice work, if the freeholder was by then a different name? What was the timescale between both processes (purchase of lease and s42 Tenants Notice)?

        Start by confirming the date the new limited company was registered at Companies House - free and public info. While there, note the names of the director(s).

        If the directors are the same people as the previous freeholder, we are in the area of clever-dick technicalities. Whatever else, they must have known of the s42 unless they changed the company's registered address and/or their own names and refused to open letters addressed to their own names.

        How quickly did they notify leaseholders of the change? Or reply to the s42 to point out the discrepancy? All worth noting down.

        If the company was registered before your conveyancing, the next question is what did the land registry say and when did it say it?

        You can pay £3 for the title extracts - get the freehold version and and the leasehold one (£6).

        Was the limited company registered at the LR prior to your conveyancing? If not, when in the timeline?

        It could be the seller did not know of the freeholder change (name only really) and therefore the seller's solicitor did not know of the change of freeholder. It would be for your solicitor to check where to send the assignment notice. And where to send the section 42. They can't just make schoolboy assumptions. That is what makes them legally qualified to act.

        Theoretically a freehold could change hands after a sale and assignment notice but before a s42 notice. I would argfue the duty of care is on the solicitor conducting the s42 to ascertain all the material facts at that point in time, not jump to conclusions.

        At the very least you should claim back your legal fees and expect the solcitor to start again. It only slows down your s42.

        Mind you, if the Justin Madders bill is supported and passes early next year, you might get a far cheaper lease extension mor gang up and buy the freehold.

        I'd say the only way you will get any justice is to see another solicitor for advice.
        Do not read my offerings, based purely on my research or experience as a lessee, as legal advice. If you need legal advice please see a solicitor.

        Comment


          #5
          MrSoffit, thank you for your reply. I have just emailed my solicitors to ask about the LPE1 and I'm waiting for a reply.

          I will certainly try and find a solicitor to take advice. My problem is that the purchase of the property has totally skint me, and I need to hold on to what I have left for the eventual lease extension. I will have to try and find pro bono representation.

          You have given me some things to look into and I will certainly start to do that. Things are further complicated by the fact that I leave to work (pro bono) abroad for six months in January.

          Thank you very much again for your help here.

          CBH

          Comment


            #6
            The solicitor when serving the Section 42 Notice of claim should have checked at the Land Registry for up to date Office copy entries

            He then, and this is the important bit, protected the position by booking a period of priority at the Land Registry and then serving a unilateral notice. This would have meant that if the freehold property was transferred the transfree would be deemed to know about it and would be bound to it. A firm of solicitors that employ a solicitor to specialise in this work should have known better

            because they failed to do so you will have to wait 2 years and then apply.

            It will mean that the cost of the statutory lease extentsion will probably increase by around £2,000 if property prices remain static over that time (seems likely with a possibilty of a dip)

            I would suggest that you ask the solicitor whether to settle the matter that in two years time, if property prices are broadly the same that they apply for a statutory lease extentsion on your behalf covering the legal costs on your side, and paying the valuation fee.

            I would be very surprised if your solicitor did not agree to such a proposal.

            Comment


              #7
              Hi sgclacy. Thank you very much for this information. I will certainly look into how the solicitors can either help me in two years, or compensate me now for the future loss. Naturally, and I am sure you would understand this, I have lost faith in the solicitor and would rather use an alternative one.

              Thanks very much for your advice.

              CBH

              Comment


                #8
                When the freehold title changes ownership , the leaseholders must be offered right of first refusal or it becomes a criminal offence. .

                Was any RFR offer made to you or previous flat owner?

                Comment


                  #9
                  Hi Gordon999, thank you for this. I am not sure if this happened. My solicitor (the one carrying out the conveyancing or the one carrying out the lease extension) never mentioned it.

                  The 'ownership' of the freehold never really changed, but the freeholders registered in under a company name. So where the freeholders were originally' Mr Freeholder' and 'Mr Freeholder2', they then registered the freehold under FreeholdProperties Ltd. Does this amount to the same thing? And if so, what, if any, is my recourse? Having said that, I am more interested in claiming off my solicitor.

                  Thanks very miuch for your help.

                  CBH

                  Comment


                    #10
                    Hi again sgclacy. Could I ask for a little clarity on something? You say that the solicitor could have "protected the position by booking a period of priority at the Land Registry and then serving a unilateral notice", and that this "would have meant that if the freehold property was transferred the transfree would be deemed to know about it and would be bound to it", what exactly does this mean? I'm sorry to appear so stupid on this.

                    Thanks very much again.

                    CBH

                    Comment


                      #11
                      To quote from Flat-living

                      The leaseholder’s solicitor will then lodge a ‘Unilateral Notice’ at the Land Registry against the freehold and any intermediate leasehold titles. The fee payable for this is £50. If the property in question is not listed by the Land (ie, it is unregistered), a Class C(iv) Land Charge should be lodged. This provides protection for the leaseholder if the landlord decides to sell the freehold and means that the lease extension process will continue as if the new owner had received the Notice.


                      so if the freehold is sold the purchaser will have to deal with the existing notice and can’t argue that as the notice doesn’t have his name on it il he doesn’t have to comply

                      i

                      Comment


                        #12
                        If the freehold title is transferred to a company, HMRC tax office treats this as a DISPOSAL by Mr F1 and Mr F2 to New Company.

                        If RFR is not offered to leaseholders prior to disposal , then New company has to offer the freehold to leaseholders on the same terms of sale or there will be a criminal offence committed by the previous owners.

                        So there is room for your solicitor to claim the transfer of freehold was done behind the backs of the leaseholders and you and your solicitor were not informed by RFR .

                        The free guide to RFR can be downloaded from www.lease-advice.org

                        You should report your problem under the current consultation for leasehold reform ending 29 Nov 2017, called by the Minister of Dept for Local Gov and Communities and also to your local MP..

                        Comment


                          #13
                          Hi Gordon999, sorry for the very late reply. Unfortunately I was involved in an accident and have been in hospital. I am not sure that the RFR exists in this case. I was looking online on the lease advice page (https://www.lease-advice.org/advice-...first-refusal/) and noticed that it stated that

                          "The majority of disposals will trigger the Right of First Refusal, but the following are exempt:
                          • disposal to an associated company: this is where the interest is transferred as an asset to another company, which has been associated with the parent company for at least two years. Therefore, for example, a landlord which is a company may transfer its freehold of a block of flats to an associated company."
                          I checked it out and the associated company has been around for over 2 years. Unless I have miss understood this and you could guide me?

                          Thanks again for your help and any other advice would be greatly received. For example, I noticed from my email trail with the solicitors, that there was a final pre-echnage search carried out. Should the change of ownership showed up then?

                          Anyway, thanks again. CBH

                          Comment


                            #14
                            you are sitting pretty. you are entitled to purchase at the same price as did the transferee, I believe notwithstanding that you can make another claim, the claim made against the former owner does not in my opinion nullify a fresh claim against the actual landlord. seller and buyer have committed a criminal offence prima facie, notwithstanding there's never yet been a prosecution you are at liberty to go and report this to the police! They will no doubt say that they sent s5 notices out but they must have got lost in the post.
                            the exemption Gordon speaks of is not relevant if Mr and Mrs have divested the freehold into a limited company. That exemption enables, for example, the freehold company to drop one estate into a wholly owned subsidiary for that estate without triggering the need to serve s5 notices

                            Comment


                              #15
                              I'm beginning to wonder if this 'change of freeholder' was not done specifically to thwart o/p's s42 notice.

                              Comment

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