Buying flat with alterations prohibited by the lease

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    Buying flat with alterations prohibited by the lease

    We are in the process of purchasing the ground floor flat in a Victorian row house. It turns out that there are alterations to the property that are not provided for in the lease which is causing problems with the purchase. The relevant facts are:
    • The lease was made in 1987 with a term of 99 years and ground rent of £50.
    • Alterations were made in 2001 and consist of moving internal walls to reconfigure the rooms and extending the back into the garden.
    • Planning permission was granted by the council for the alterations.
    • The leasehold does not allow for the freeholder to provide consent to alterations — "The Lessee will not make any alteration in or addition to the height size front back roof walls timbers or elevations of the demised premises or the yard or garden wall or fences thereof."
    • The lease was extended in 2011 for an additional 90 years and a peppercorn ground rent.
    • Presumably, the ground rent was collected before the extension and the property was surveyed/inspected when the extension was granted.
    • The property was sold three times since the alterations — 2002, 2006 and 2011.
    • We own the upper flat in the building and plan to pursue the freehold through collective enfranchisement once we purchase the ground floor flat.
    • The indemnity policies apparently do not cover any scenario in which the alterations are brought to the attention of the freeholder — such as pursuing the freehold.
    Given the circumstances, our conveyancing solicitor is finding it difficult to find an indemnity policy that will satisfy the lender. Knowing that we are going to pursue the freehold, our solicitor is not able to say to the lender that there is no risk from the alterations which breach the lease. She has suggested making the seller go to the freeholder but the lease doesn't allow for the freeholder to provide consent so I don't understand what that would accomplish.

    From the reading I have done (largely in these forums) I don't believe that the freeholder would have a case. The alterations are more than 12 years old and would be a one-off breach rather than an ongoing breach, so the Limitation Act of 1980 would apply. That should be case closed, though additionally, the freeholder has (presumably) collected ground rent since the alterations and has extended the lease since the alterations so surely knows about them. My solicitor is not convinced — "I understand that the rear extension is quite old but as a lease is a continuing contract I am not certain that we can rely upon the Limitation Act."

    Any ideas on how to solve this puzzle? Surely there must be a way forward. Would it make sense to get a letter from a solicitor that specialises in this area that the Limitation Act does apply and there is no risk? How would I find such a solicitor?

    Thank you for any help or insight you might have.

    -g

    P.S. I've only recently found and joined this forum. In a short time, I've learned a lot about leaseholds and thank you to Lawcruncher for all the informative posts.

    #2
    If you can't get the finance you'll have to get a bridging loan till you can buy the freehold and issue new lease. Can't you remortgage your flat ?
    Whoever pointed it out needs shooting

    Comment


      #3
      In theory you are right that the alterations are statute barred. Keep quiet about the alterations and bung in your application for a collective as soon as you can. It should be Alright on the night

      Comment


        #4
        I don't know whether mortgage providers would accept this, but I have seen it argued that a lease 'extension' is actually the surrender of the old lease and the granting of a new one.
        The new lease is therefore for the property as it is at the time that the 'extension' is granted, so the granting of the new lease removes the possibility of the freeholder being able to take action for any unauthorised alterations that took place previously.

        Do you have evidence of when the alterations were carried out?

        Comment


          #5
          Originally posted by Section20z View Post
          Whoever pointed it out needs shooting
          That would probably be me 😬. Our solicitor sent me a floor plan and asked if it matched the property. I said no 😢.


          Originally posted by flyingfreehold View Post
          Keep quiet about the alterations and bung in your application for a collective as soon as you can.
          It is our solicitor that I need to keep quiet now 🙊.


          Originally posted by Macromia View Post
          Do you have evidence of when the alterations were carried out?
          We have the planning permission from the council from 2001 as evidence. The fact that the freeholder extended the lease with the alterations seems a sound argument as you point out.

          It sounds like I need to make a more convincing case to our solicitor so she'll provide the necessary reassurance to the bank. I am left wondering why I'm the one preparing the legal argument.

          Comment


            #6
            "The lease was extended in 2011 for an additional 90 years and a peppercorn ground rent."

            The above is the most important point which has escaped your solicitor's notice. When the new lease was granted the old lease became a dead letter. The new lease was of the premises as altered. There has been no breach of the new lease. There is no problem.

            Even if the new lease had not been granted there would be no problem. Making alterations is a one off breach and is covered by the Limitation Act.

            Comment


              #7
              Originally posted by Macromia View Post
              I have seen it argued that a lease 'extension' is actually the surrender of the old lease and the granting of a new one.
              The new lease is therefore for the property as it is at the time that the 'extension' is granted, so the granting of the new lease removes the possibility of the freeholder being able to take action for any unauthorised alterations that took place previously.
              First paragraph - no argument.

              Second paragraph - spot on.

              Comment


                #8
                Thank you very much for the help. I've made my case to our solicitor — let's see if she accepts it.

                Comment


                  #9
                  Our solicitor is not accepting it. She escalated the matter internally and they are refusing anything other than consent from the landlord.


                  “The doctrine of waiver doesn’t apply to leasehold, in my view. Is the freeholder a commercial entity, or is it share of freehold? I would be very clear on advice to the client that if anything other than share of freehold, the freeholder would come back and would be entitled to charge costs for retrospective consent, and even take action if they felt they could, for the works without consent, which would impact on value.

                  Where there is an absolute prohibition and here, I expect structural changes to the main walls, part of the freehold, rather than the leasehold demise, have been carried out, the Duval case applies and there could be a request to reinstate. In Duval the claim was against the freeholder for giving consent to works that were not authorised under the lease, but the same principle of reinstatement order risk applies”


                  Looks like I need a new solicitor.

                  Comment


                    #10
                    I can't stand it. It's legal gibberish.

                    Comment


                      #11
                      g . Out of interest, would u mind asking ur solicitor to which case law they are referring to in their response?

                      This could help check if the information they are giving u is correct or not.

                      Comment


                        #12
                        I wouldn't mind at all. I have asked and will report back what they say.

                        I am also looking for a new solicitor, though is impossible right now to find anyone with the stamp duty holiday coming to an end.

                        Comment


                          #13
                          Let's take this step by step.

                          What would the position be if no new lease had been granted? There are two questions to ask.

                          The first is whether the right to forfeit has been waived. The suggestion that the doctrine of waiver does no apply to leasehold is clearly wrong as opening any book on landlord and tenant law will confirm. I also do not see how the landlord's legal status is is any way relevant to determining the legal position. The right to forfeit is waived if at any time after the landlord has knowledge of the breach he does something to affirm the lease, such as demand or accept rent. A breach is, however, only waived if it is a one-off breach. I have found two sites, one apparently a barristers' chambers, which agree with me that carrying out alterations without consent is a one off breach:

                          Commercial Property: Tenant’s Breach of Lease - Part 2 (mplaw.co.uk)

                          PUBLICATION-Hot-Topics-in-Property-Law-2008-Reinstatement-of-Alterations-at-the-end-of-a-lease-JG.pdf (wilberforce.co.uk)

                          The second is if the landlord is out of time to take action. The time limit for action under a lease granted by deed is 12 years as provided by section 8 of the Limitation Act 1980. The landlord is clearly out of time as the alterations were made 20 years ago. Since the landlord cannot take action, any question of whether there was a waiver is in fact irrelevant.

                          The position is though that a new lease has been granted. A lease (A) of premises granted where there is an existing lease (B) of the same premises effects a surrender of lease B. Everything is now controlled by lease A and lease B is a dead letter. Lease A is a lease of the premises as they existed when it is granted, that is with any alterations carried out beforehand. A whole new situation was granted. The past is wiped out. The only possible exception can be if lease A provides to the contrary.

                          However you look at this there is no problem. Even if it were the case that the original lease still applied limitation would rule out any action by the landlord.

                          Comment


                            #14
                            Originally posted by g . View Post
                            I wouldn't mind at all. I have asked and will report back what they say.

                            I am also looking for a new solicitor, though is impossible right now to find anyone with the stamp duty holiday coming to an end.
                            Copy post 13 and email it to the solicitors asking for a closely reasoned refutation if they disagree with what I say.

                            Comment


                              #15

                              [QUOTE]
                              Where there is an absolute prohibition and here, I expect structural changes to the main walls, part of the freehold, rather than the leasehold demise, have been carried out, the Duval case applies and there could be a request to reinstate. In Duval the claim was against the freeholder for giving consent to works that were not authorised under the lease, but the same principle of reinstatement order risk applies”[QUOTE]

                              pls check below link, since it refers to a "Duval" case, not sure if this is the one that your solicitor is referring to.

                              https://www.buckles-law.co.uk/blog/s...-of-covenants/

                              Following @lawcruncher's advice in post 13, I would go back to your solicitor and challenge their feedback.

                              In parallel, so not to waste any more time, I would give Buckles solicitors a call, since they seem to be more on the ball on legislation/case law than your own solicitor and see if they would take you on as a client to help you speed-up the purchase of the ground floor flat.

                              Comment

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