Two flats with resident freeholder with no lease...transfer of share of freehold?

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    Two flats with resident freeholder with no lease...transfer of share of freehold?

    Firstly I'd like to thank Richard Webster for his advice on this elsewhere...I just want to try and get as much advice as possible, ideally from people who have come up against similar problems.

    Property is a house converted into two flats. Developer (who had purchased house as single entity) sold 1st floor flat in 2002 and set up lease between himself as landlord and 1st floor flat.

    Lease states:

    "The Landlord undertakes with the Tenant immediately following the grant of a lease of the last of the flats in the Building to complete the transfer of the Landlord's freehold reversion in the Building to the joint names of at least one of the owners of that time of the Ground Floor Flat and the First Floor Flat"

    However, when the developer sold the Ground Floor Flat in late 2003 this did not happen (presumably to avoid the extra expense); the Ground Floor Flat retained the whole freehold and no lease was drawn up for it.

    I subsequently purchased the First Floor Flat in 2004 and was not made aware of any implications of this arrangement.

    I am now having problems selling the flat as the buyer insists that they will not proceed until they have 'secured an ability to acquire a share in the freehold of the property'. I understand that this relates to the ability to enforce the covenants in the lease: under the present arrangements the Tenant in the First Floor Flat can only enforce convenants with regard to the Ground Floor Flat via the Freeholder, who being the occupier of the flat is unlikely to act against himself. These covenants are present in the lease ("To impose in any Lease of the Ground Floor Flat...covenants..in similar terms to those..of the Lease...and until such a Lease is granted the Landlord will be responsible for the performance and observance of such covenants").

    It would seem very unlikely that I would be able to persuade the freeholder to transfer a share of the freehold and draw up a Lease for the Ground Floor Flat even if I were to offer to pay the legal fees for this as there is no benefit to them in doing this, and in this situation enfranchisement cannot be forced (resident freeholder, less than four flats).

    So my questions are: (i) is there any way of resolving this impasse? and (ii) should my solicitors have recognised this situation when I purchased the property?

    Any help or advice most gratefully received...

    #2
    You could seek advice by making an appointment to see an advisor at LEASE ( www.lease-advice.org).

    Comment


      #3
      Thanks, I have already had a word with them, and they seemed to think that most buyers would not find this a problem...? I had two people interested in the property: one enquired about this initially and now the other, whose offer I accepted, has come up with the same issue 2 months into the process.

      Comment


        #4
        Originally posted by Faloola Chong View Post
        Thanks, I have already had a word with them, and they seemed to think that most buyers would not find this a problem...? I had two people interested in the property: one enquired about this initially and now the other, whose offer I accepted, has come up with the same issue 2 months into the process.
        I tend to agree, I think they see it as getting a freehold, which of course it is not. As long as the lease has clear obligations for the landlord which the tenant can enforce, they are just being a bit picky.

        So tell them you are selling as is, they can enforce the terms of the lease, and spend the time and money and get the benefit.

        If you secured the interest in the freehold then you would selling the flat and your interest in the freehold. The price would then go up.....
        Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

        Comment


          #5
          If I understand correctly from my solicitor the problem is that at present the terms of the lease cannot be enforced by the leaseholder.

          The freeholder cannot be forced to transfer a share of the freehold; this would only happen if they choose (or agree) to grant themselves a lease on their flat (and why would they want to do this?).

          It is not clear at present how the tenant would be able to enforce the landlord's obligations in the lease, as it is the landlord who is reponsible for enforcing these obligations.

          Obtaining an interest in the freehold would overcome this paradox I presume (as these obligations would then be enforceable through the other lease?)

          Comment


            #6
            Also I forgot to mention that it is a 999-year lease, which I understand means that the interest in the freehold would have negligible value

            Comment


              #7
              See this thread: http://www.houseweb.com/forum/showthread.php?t=2814
              RICHARD WEBSTER

              As a conveyancing solicitor I believe the information given in the post to be useful (provided it relates to property in England & Wales) but I accept no liability except to fee-paying clients.

              Comment


                #8
                Thanks again Richard for all your advice in that thread - as I said, just trying to get together as much information as I possibly can to try and solve this problem

                Comment


                  #9
                  It's just occurred to me that technically we don't have a resident freeholder as the owner of the other flat and freehold has been living in the US for the past two years while letting the flat to her ex-partner

                  Not sure if this could have any bearing on the matter

                  She is also close to completing a sale of the flat and freehold, just to further complicate matters

                  Comment


                    #10
                    I think this has to be two seperate things.

                    1: Enforcing the terms of the lease ( ignoring freehold) such as repairs insurance nuisance etc. As long as the terms of the lease are adequate, then they are being picky.

                    There response is frankly wrong. While unlikely to act, they are contractually obliged to, even if you need to require a court to instruct them to act.*

                    If it is only two flats, if you have two leaseholders A + B that have a flat each and A + B jointly own the freehold, the situation is exactly the same. B cannot force A, a joint freeholder to take action against themselves as they are in deadlock, 1 vote each. What your buyer is asking for makes no difference when it comes to enforcing the lease !!!!

                    2: Freehold; actually until the freeholder grants a lease, the clause is not operative or enforceable. It may as well not be there.

                    If the buyer is insisting that they want a share of the freehold then that is not what you were selling them. You were selling a 999 year lease.

                    As to value of the FH, if all the flats were on 999 year leases, then the value is quite low ( in most cases). With a flat that is not subject to a lease, the FH is actually quite valuable.


                    *That said if the building qualifies this could be regarded as a breach of covenant which allows the appointment of an LVT appointed manager, compulsory acquisition of the freehold, or right manage.
                    Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

                    Comment


                      #11
                      Thanks, that's really helpful. Point 1 confirms what I couldn't work out: I couldn't see how the alternative shared freehold situation would make any practical difference

                      Comment


                        #12
                        Which makes me suspect they don't actually understand what they are asking for....

                        "Share of freehold is good right? That's like the freehold, I'll have that then".
                        Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

                        Comment


                          #13
                          What are the annual ground rent and service charge payments on your 999 year lease flat property ?

                          Comment


                            #14
                            Ground rent is a peppercorn and there are no service charges (no communal areas and lease assigns responsibility for repairs to and maintenance of specific parts of building to each flat)

                            Comment


                              #15
                              1. So with 999 years lease at peppercorn ground rent, the flat is virtually freehold except your name is not on the property title registered at the Land Registry.
                              Under the terms of your lease , do you need to pay to register any change of the mortgage lender or pay buildings insurance to the freeholder ?

                              2, I was wondering if you explained/educate to your potential buyer that

                              (a) you are not able to include a transfer of share of the freehold as the terms of lease are not satisfied by the freeholder.
                              (b) based on current peppercorn ground rent ( i.e NIL GR payment ), gaining a share of the freehold will not bring anymore benefit compared to present status as leaseholder.

                              Comment

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