Solicitors advised me to buy freehold and leasehold, now unable to extend own lease

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    Solicitors advised me to buy freehold and leasehold, now unable to extend own lease

    I bought a flat with a defective lease (missing pages, short lease, wrong plan etc.). I advised solicitor that freeholder was open to selling the freehold (with other leaseholder not interested in buying a share).

    Solicitor advised I should not complete on leasehold without completing on freehold in order that I fix my lease, so I tied the two together and bought both leasehold flat and entire freehold interest.

    I now want to fix my lease and sell the freehold (flat downstairs has reversionary lease and no plan to extend and I don't want the responsibilities of being a freeholder). I am advised I am unable to extend my lease as both the freehold title and leasehold title are in my name.

    Original solicitor confirmed this to be true, re-read the leases, billed me £550 for their time thus far and suggested a few ways to fix the issue, all of which will cost, and advised me to seek professional advice regarding possible CGT and SDLT implications.

    Should I be kicking up a fuss? Seems this is something I should have been advised of at the time I instructed solicitor on both purchases? Seems it would have been very simple to complete the freehold transaction as a company or in joint names with a family member or S/O as they are suggesting I do now.

    #2
    If you bought a flat with a defective lease, you should expect to pay the cost to repair the lease. Don't fuss .

    The freeholder has the right to change the terms of the lease and you can exercise this right if you own the freehold title.

    However the legislation does not allow the freeholder to issue a lease to himself and this is only a minor problem.

    So you should plan to change the registered name of the freeholder title for the property from "sole name" to "joint name" by gifting 1% to a family member . By transferring only 1%, you should escape the CGT and SDLT ( below £ 40K )

    Comment


      #3
      Originally posted by Gordon999 View Post
      If you bought a flat with a defective lease, you should expect to pay the cost to repair the lease. Don't fuss.
      Yep, fully agree. The bit I am peeved about is that as they acted in the simultaneous purchase of both, knowing my intentions were to fix the lease, therefore they should have advised me then to put the freehold in joint title with someone else. Instead, I have thus far racked up a £550 bill for them to advise on options to fix this problem, plus the cost of changing the title of the freehold. All of which should have been completely avoidable.

      The cost of the new lease is naturally something I fully expect to have to pay.

      Comment


        #4
        I first observe that if you own the freehold of a building and live in one of the flats, selling the freehold to a stranger has to be a bad move. You move from a situation where you are in control to one where you are not. Better in my view to keep the freehold and assume the responsibities of being a landlord. In any event the landlord's covevants under the lease of the other flat are still enforceable against you unless you get a release from the other leaseholder.

        The next observation is that, where you are at now, the fact you have a defective lease is of no consequence so long as you do not want to sell the flat. That is of course because you are your own landlord. By buying the freehold when you bought the flat you got round the problem of the lease being defective. That was, for both you and the seller, the quickest and cheapest way of dealing with the matter.

        Even so, on the face of it seems that you perhaps did not get the best or full advice from your solicitor. However, without knowing what you said you wanted to achieve and the advice you were given, I do not think we can say that your sollcitor was negligent or failed to follow your instructions.

        I feel he should have said (if he did not) that one way forward was to get the seller to sort the mess out and then sell. It is for a seller to sort out any defect in title, or at the very least to cover the cost of doing so. If the seller was not the freeholder that is what he would have had to do. As it was, he did own the freehold which offered a simple, if not ideal, solution. The solicitor should (if he did not) have gone on to discuss the issue with you pointing out the various options and their pros and cons and the cost of following them.

        My overall impression, based on the basic information supplied, is that your solicitor was not negligent, but did not exactly cover himself in glory. However, I do think it is a something of a cheek, bordering on the outrageous, to charge you £550 for telling you he did not do a great job. I think you need to get bullish and decline to pay the bill and insist he now does the job properly and at his expense. What should be done and how depends on what you want to achieve and, as I said above, I really do feel that should not include selling the freehold before you sell the flat.

        Comment


          #5
          Surely o/p can issue a lease of any length to anyone he wishes when he sells, similar to a new-build?

          You don't want to sell the freehold to someone else though, as they will be looking to re-coup the investment with imaginitive service charges.

          Comment


            #6
            Originally posted by JK0 View Post
            Surely o/p can issue a lease of any length to anyone he wishes when he sells, similar to a new-build?
            He can do that and one or two other things. The main point is that he is in control. His solicitor should though have tidied things up one way or the other at the time of the sale.

            Originally posted by JK0 View Post
            You don't want to sell the freehold to someone else though, as they will be looking to re-coup the investment with imaginitive service charges.
            Agreed.

            Comment


              #7
              The freehold was quite expensive as both leases were reversionary and with neighbour not interested in extending I'd like to get some of my the money I paid back.

              I do understand the value of the freehold is appreciating the longer an extension does not take place, and they are currently unable to sell without extending - but equally they are unlikely to sell any time soon.

              Comment


                #8
                Not quite sure what you mean by reversionary lease here as it means a lease which takes effect at a future date, which clearly cannot be the case.

                I note what you say about wanting to get your money back, but consider the following:

                The expense of getting a new lease drawn up. If the conveyancer does his job properly (which is what you need as there is no point putting something right without getting it completely right) he will have to read the lease of the other flat to make sure the new lease dovetails with it. That is going to be time consuming, which means not cheap. Apart from the conveyancer's fees you will have to pay the disbursements of stamp duty land tax and LR fees. The exercise will have to involve the transfer of the freehold to yourself and a nominee (and then back again?) which incurs more fees and disbursements. You need to check you do not unwittingly incur a tax charge.

                The sale of the freehold will incur more legal costs. Compared to a sale with vacant possession, the costs will be disproportionate to the value.

                If the lease of the other flat is also defective that will prevent or delay a sale or lead to the buyer wanting a discount.

                The terms of the new lease which will be attractive to a buyer of the flat (very low rent and very long term) will not make the freehold attractive to an investor. If you put a decent rent in you end up paying back the sale price. (You should in no circumstances provide for the rent to exceed £249 p.a. at any time during the term.)

                Many people who buy freehold reversions as an investment tend to collect them seeing them as a nice little earner which will pay off one day. Others buy them so they can manage them and charge management fees conjured up out of thin air. Some buy them for both reasons.

                As things stand you are in control. If something needs doing you can get on and do it. If something does not need doing you do not have to argue that it should not be done. If you want to do somethng you can do it without have to ask and pay for someone else's consent.





                Comment


                  #9
                  Thanks for the responses. I have refused to clear the bill and have repeatedly stated why I think it is unfair and have repeatedly asked them why they didn't advise of the issue regarding same ownership over both freehold and leasehold at the time of purchase.

                  They have failed to answer me other than to explain that they think the bill for their time is fair - they have skirted around the question regarding the freehold/leasehold ownership advice only to say they feel they acted correctly on both transactions.

                  I am now getting letters threatening debt collection and interest.

                  I have not received a satisfactory explanation as to why they didn't advise me of the pitfalls I now face, leaving me unable to :
                  • get a residential mortgage (mainstream residential lenders refuse to lend on leaseholds where freehold title holder is the same as leasehold)
                  • extend, amend, fix my lease
                  • sell just the freehold without a potentially significant financial loss due to the short and broken lease that I cannot fix/extend
                  Fixing the issue means changing title and associated costs and potential tax implications.

                  While they refuse to explain properly why they don't fee bad advice (or lack of good advice) was given, I think it is extremely unfair to push for the bill. It should at least be on hold until the matter is resolved.

                  (Just to add the previous freeholder and leaseholder were separate and two transactions were made, the solicitors were aware that the two transactions were linked as I needed the freehold in order to fix the lease, that was the premise and that was why I approached the freeholder about buying the freehold from them. So despite being different transactions, they were worked on concurrently by two solicitors from the same firm, one "leasehold expert" and one land "law expert")

                  Comment


                    #10
                    Start by asking for their complaints procedure.

                    Comment


                      #11
                      The place for making complaints against solicitor ( for inadequate advice) is to the SRA ( Solicitors Regulation Authority ) ...

                      Comment


                        #12
                        I agree with Anna1985 that the next step is to invoke the firm's complaints procedure.

                        A bit of a problem here is that the case is not a clear one of negligence.

                        Comment

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