Understand the role of joint freeholder and leaseholder

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    Understand the role of joint freeholder and leaseholder

    I am very close to the exchange date on selling my flat. I am selling it with a share of the freehold and have not charged for this because we got the asking price. The solicitor has drawn up a lease for the buyers of my flat, with a 125 year lease and £250 p/a ground rent.

    I am confused as to the relationship as they are both, a joint freeholder and have a lease.

    The solicitor has had a query from the buyers solicitor, asking why they are paying the ground rent if they are joint freeholders and for this to removed from the lease. Also, that my solicitors wants to the ground rent was "payable to only you"

    I am none the wiser and hope this will not hold up the exchange.

    #2
    It sounds like the buyers don't understand that leaseholder and freeholder are two separate roles.

    As a leaseholder they are required to pay ground rent if this is in the lease.
    As someone who has a share of the freehold they would then be entitled to receive a share of all the ground rent received by the freeholder. I'm not really sure how a lease could be written in a way that means ground rent isn't paid to all those who have a share of freehold, but I guess that this might be possible.

    If the leases for the property don't allow for all potential freeholder costs to be recovered from leasholders, ground rent that is paid can be useful to cover these costs. Having a requirement for leaseholders to pay ground rent also affects how much may need to be paid for lease extensions (again with anything paid usually shared between all those with a share of freehold).

    If the buyers want a lease without ground rent they should expect to pay slightly more for this.

    Comment


      #3
      Seems a very strange move from your solicitor, did they not ask you first ?
      How many flats in the building ? Why are they issuing a new lease at all ?

      Comment


        #4
        So there are two flats. Originally I owned the entire freehold and there was only a lease on the basement flat, which was sold off in the 1980's and a lease created. However, my flat did not have a lease as I couldn't grant a lease to myself.
        Now I am selling my flat and the new owners are getting a share of the freehold, so a lease has to be created.
        The question is do the still have to pay the ground rent and why are they asking to have it removed on the lease?

        Comment


          #5
          Why would you put in ground rent that you pay to yourself ? With just two flats it should be a peppercorn and ideally 999 years , otherwise it will cost your buyer to extend the lease in future.
          The whole idea of owning the freehold is to get rid of these issues.

          Comment


            #6
            This is another example of a new thread that would perhaps have been better added as a continuation of a previous thread.

            If I remember correctly the OP is selling only a share of the freehold while retaining a share themselves (and perhaps creating an intermediate lease for the other property).
            If the buyer still has to pay ground rent, and has to pay a premium if they wish to extend the lease in the future the OP will benefit by receiving a share of that.

            Giving the buyer a share of freehold with a lease that has no ground rent and a very long lease only benefits the buyer - it is up to the buyer and the OP as the seller to agree what is being sold for whatever price the buyer is willing to pay.

            Comment


              #7
              I take it there is chance basement flat could go for lease extension and there is a considerable amount to gain.

              ​​​​​​yes, they could still pay ground rent or not - it is your decision, equally they could pull out of the transaction.

              Comment


                #8
                I think the problem occured when the lease was drawn up. originally it was intended to be sold as a leasehold but the sale fell through and all other potential buyers wanted a share of the freehold.

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