Freehold title, but only 80 year lease?

[A.D.]

I can't see an answer to this on the forum - and the conveyancer doesn't seem to want to answer my questions.

The property I wish to purchase is an end of terrace house converted into two flats. Although I was told it was a freehold, it is actually a freehold title over both flats and only an 80 year lease on the property I am purchasing.

If I was to sell this property in the future with a 70 yr lease but with the freehold intact would there be problems with the purchaser raising a mortgage?

What happens at the end of the lease? Can the lease be extended and how much will this cost? Is there any point in extending it?

Secondly, should the vendor have offered the second flat a share of the freehold when he put it up for sale? There is a £50 ground rent for both flats.

What happens at the end of the second flats lease. Can I sell them a share of the freehold?

[jeffrey]

1. Who owns freehold: your vendor or someone else?
2. [If V] V cannot just sell f/r to you but has to offer it to both lessees (OT + you, once you've bought leasehold). There's a statutory right of pre-emption.
3. [If not V] Your purchase of a 70-yr leasehold is a problem. Extending will always be expensive whenever term below 80 yrs. Lenders don't like lending on security of lease of <70 yrs
4. Tenant has legal right to 90 yr extension, but only after owning lease for >2 yrs.

[A.D.]

Thanks -

The vendor is the freeholder, and he is attempting to sell the freehold to both flats and an 80 year lease on one flat.

[jeffrey]

Thanks -

The vendor is the freeholder, and he is attempting to sell the freehold to both flats and an 80 year lease on one flat.

Is other flat not subject of any lease at all? Is V trying to sell f/r for both flats plus "your" leasehold? Or f/r for both (subject to lease of other flaT) + "your" leasehold?

[A.D.]

Both flats have an 80 year lease.

[Poppy]

I can't see an answer to this on the forum
Oh yes there is. A thread started on 1 December 2006 by Andy G entitled "76 year lease on share of freehold". ;)

There isn't a problem per se if you buy a lease which has 80 years unexpired. I don't actually think you have a problem here at all.

By virtue of the fact that you will purchase a share of the freehold and the other lessee if they are smart should also purchase an equal proportion of the freehold, when y'all decide to extend your leases you will all pay one half of the legal cost. Matters such as eligibility, valuation, marriage value are irrelevant because there's no need to convince the freeholder because you already are the freeholder!

You should be more concerned, in my opinion, that you can agree on the big things such as maintenance of the building.

Do some research and see if I'm not wrong.

[A.D.]

Thanks - I did see that thread, but the difference is that there is no share of the freehold - on purchase I would own the freehold on both flats (assuming the other leaseholder has declined the opportunity to purchase their lease).

One of the critical questions is the cost of extending the lease. If the freehold and lease of one flat is worth £220k, what is the likely cost of extending the lease, and leavin gthe second flat with the original lease?

[Poppy]

Surely you're jumping the gun. By law, if the existing freeholder intends to sell the freehold, it has to be offered to the existing lessee first. Do you have any reason to suspect that the other lessee will choose not to buy? Additionally, if the existing freeholder does not give the other lessee the right of first refusal (this is a criminal offence) and then you consequently buy, then the disenfranchised lessee can force you to sell half of the freehold.

I think you should proceed by assuming that the existing freeholder will observe the law and you will share the freehold and its associated responsibilities with the other lessee.

[jeffrey]

Poppy is correct, but "half of freehold" is confusing. ALL of freehold must be kept intact, no matter who owns it- DO NOT SPLIT IT UP BETWEEN LEASEHOLDERS as that will lead to the dreaded "flying freehold" lurgi from which escape is difficult and expensive.

[Poppy]

Sorry, did not mean for it to come across to split the freehold. Not my intention at all.

The freehold should be shared 50:50.

However if the other lessee does not wish to purchase a share of the freehold having been consulted, then there is no barrier to a sole freeholder.

[agingsurveyor]

A further point is that in common law you cannot be both freeholder and lessee - IF the OP bought the whole freehold and the lease then the lease would merge with the freehold and disappear - in other words he would have a freehold with part possession.

[Poppy]

That's a bit confusing. Where I solely own the freehold and a lease to a particular flat, I can sell either one separately. Both registered titles still exist.

[jeffrey]

That's a bit confusing. Where I solely own the freehold and a lease to a particular flat, I can sell either one separately. Both registered titles still exist.

Yes. Merger is not automatic; existence of a mortgage would preclude it (unless Deed of Substituted Security); and it usually occurs only when one explicitly requests merger at HMLR.

My practice is to include an express clause in the reversion Transfer deed, stating EITHER that merger is requested (declaration of merger) OR that the Applicant wishes the lease to continue in full effect (declaration against merger).