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Freehold/Leasehold Query

including wills and probate
terminal7
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Freehold/Leasehold Query

#446727

Postby terminal7 » September 30th, 2021, 8:00 pm

My son is considering buying a flat with a lengthy leasehold (150 years still left). There is no ground rent. The freehold is apparently owned by a small company that may have other freeholds. What pecuniary benefit can the freeholder have in such an arrangement? Is the freehold actually worth much given no income? Can the freeholder request payment from the leaseholders for any 'permissions'.

He is trying to get hold of the leasehold agreement from the parties involved. Would such a document be 'lodged' anywhere immediately accessible?

T7

mc2fool
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Re: Freehold/Leasehold Query

#446746

Postby mc2fool » September 30th, 2021, 8:39 pm

terminal7 wrote:My son is considering buying a flat with a lengthy leasehold (150 years still left). There is no ground rent. The freehold is apparently owned by a small company that may have other freeholds. What pecuniary benefit can the freeholder have in such an arrangement? Is the freehold actually worth much given no income? Can the freeholder request payment from the leaseholders for any 'permissions'.

He is trying to get hold of the leasehold agreement from the parties involved. Would such a document be 'lodged' anywhere immediately accessible?

T7

The answer to most of those questions will be in the lease, and he is right in asking for a copy of it.

Freehold and leasehold titles can be found on and downloaded from the Land Registry (£3 each). Lease agreements should also be registered there but may or may not be (depending on age) and may or may not be downloadable or only accessible by snail mail application, or not at all, and in any case are usually only conveniently accessible by solicitors and the like. Start here: https://www.gov.uk/government/organisations/land-registry

Your son may find the Leasehold Advisory Service website useful. There's a lot there and it takes a while to find your way round the site but it's very informative and comprehensive. https://www.lease-advice.org/

brightncheerful
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Re: Freehold/Leasehold Query

#446774

Postby brightncheerful » September 30th, 2021, 10:29 pm

Likely there is a ground rat but probably too nominal to be worth collecting or pay, for example £1 or a peppercorn.

In bygone days, peppercorns were valuable. Go back in time and ground rents weren't necessarily monetary: a case of champagne, a bouquet of flowers. recently I spotted an auction lot where the ground rent was a barrel of beer (firkin?).

The advantage to a freeholder of a nominal ground rent is in the other terms and conditions of the lease, for example building insurance, limitations on use , alterations, etc.

Mike4
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Re: Freehold/Leasehold Query

#446780

Postby Mike4 » September 30th, 2021, 10:39 pm

brightncheerful wrote:Likely there is a ground rat but probably too nominal to be worth collecting or pay, for example £1 or a peppercorn.

In bygone days, peppercorns were valuable. Go back in time and ground rents weren't necessarily monetary: a case of champagne, a bouquet of flowers. recently I spotted an auction lot where the ground rent was a barrel of beer (firkin?).

The advantage to a freeholder of a nominal ground rent is in the other terms and conditions of the lease, for example building insurance, limitations on use , alterations, etc.



It is more than 'likely' that there is a ground rat. Great typo! There HAS to be some rent of some sort or other as I understand it, or it wasn't a lease that was created. But bear in mind IANAL.

The biggest advantage to the avaricious freeholder is charging massive fees for issuing copies of the accounts showing service charges paid up to date, permissions to sublet, change the windows etc etc.

Clitheroekid
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Re: Freehold/Leasehold Query

#446796

Postby Clitheroekid » September 30th, 2021, 11:53 pm

Mike4 wrote:There HAS to be some rent of some sort or other as I understand it, or it wasn't a lease that was created. But bear in mind IANAL.

No, you can have a valid lease with no rent payable. Section 205(1)(xxvii) Law of Property Act 1925 states:

“Term of years absolute” means a term of years (taking effect either in possession or in reversion whether or not at a rent) ...

... which admits the possibility of a lease without any rent being payable.

And bear in mind IAAL! ;)

Mike4
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Re: Freehold/Leasehold Query

#446801

Postby Mike4 » October 1st, 2021, 12:02 am

Clitheroekid wrote:And bear in mind IAAL! ;)


Never mind.

My sincere commiserations! ;)

UncleEbenezer
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Re: Freehold/Leasehold Query

#447054

Postby UncleEbenezer » October 1st, 2021, 6:03 pm

He (or his solicitor) should check who the freeholder actually is, and the terms of the lease.

Bit of history here. In the 1980s, government legislated to try and prevent some of the abuses by freeholders that were common and getting into the news. There were two main acts, in 1985 and 1987 if memory serves. Part of one of those acts was to give leaseholders a "right of first refusal" any time a freeholder chooses to sell the freehold.

Of course the abusive freeholders ensured they had some good loopholes (not to mention friends in the judiciary) so the legislation didn't work as intended. But it did have an unintended consequence: basically-honest freeholders sold up ahead of the "right of first refusal". Buyers of those freeholds were mafia-style interests who expected to work around the legislation. If your son's prospective freeholder bought the interest in the 1980s, huge red flag! But I'd treat any freeholder whose interests aren't directly aligned with leaseholders as a potential risk.

The danger the 1980s legislation failed to fix is service charges. This will depend on your specific lease, but it could imply unlimited liability, and while the legislation introduced various supposed safeguards - such as a right to be consulted - those are ridden with loopholes, and ultimately a court can set them aside for its friends.

[edit to add] The story of flats blighted by cladding has been in the news since Grenfell. Worst case with a mafia freeholder, you could be in a similar (or worse) position but without the publicity and public sympathy.

mc2fool
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Re: Freehold/Leasehold Query

#447083

Postby mc2fool » October 1st, 2021, 8:11 pm

UncleEbenezer wrote:Bit of history here. In the 1980s, government legislated to try and prevent some of the abuses by freeholders that were common and getting into the news. There were two main acts, in 1985 and 1987 if memory serves. Part of one of those acts was to give leaseholders a "right of first refusal" any time a freeholder chooses to sell the freehold.

Yes, but things have moved on from then, and now (since 1993) leaseholders have the right to buy the freehold whether the freeholders wants to sell or not. For a block of flats it's called Collective Enfranchisement. See https://www.lease-advice.org/advice-guide/ce-getting-started/

Further (and irrespective of the above), since 2002 there has also been the Right to Manage, which lets the leaseholders of a block of flats take over the management of the building.

"The right was introduced, not just as a means of wresting control from bad landlords, or managing agents, but also to empower leaseholders, who generally hold the majority of value in the property, to take responsibility for the management of their block."
See https://www.lease-advice.org/advice-guide/right-manage/

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Re: Freehold/Leasehold Query

#447085

Postby Lootman » October 1st, 2021, 8:18 pm

mc2fool wrote:Further (and irrespective of the above), since 2002 there has also been the Right to Manage, which lets the leaseholders of a block of flats take over the management of the building.

"The right was introduced, not just as a means of wresting control from bad landlords, or managing agents, but also to empower leaseholders, who generally hold the majority of value in the property, to take responsibility for the management of their block."
See https://www.lease-advice.org/advice-guide/right-manage/

This is true. However problems still happen: the freeholder problems cease but the personalities of your fellow lessees can be an issue. Essentially decisions get made at meetings of the co-owners and they can be fractious, reminiscent of some of the horror stories you hear about co-op buildings in New York City.

I do not know this first hand as I have not owned a leashold property since 1990. But a good friend of mine in Ealing downsized from a house to a flat, spent a miserable 5 years fighting his fellow occupants, and then upsized to a house again!


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