Title/registry problems with buying repossession property

mistrihelen

Hi,

I am in the process of buying a repossession property (am a first time buyer) and have encountered a couple of what sound like big problems, and wondered if anyone else had experienced them.

First, the house is a terrace with a shared access tunnel that we are supposed to have right of way to. However, the title was incorrectly drawn up so that the house has no rights to the tunnel whatsoever. (Solicitor says the rights are currently 'nonsensical')

Secondly, it used to be leasehold, and the freehold was bought by the lessee back in 1986, but it was never 'merged' properly - so apparently it would be both lease and freehold at the same time.

Correcting all this will take time, but as it's a repossession I'm worried that the vendor will still want us to complete with 28 days - I don't see how that can happen.

Also, if this stuff has always been wrong with the house, why have none of the other owners over the years ever had it fixed? Have other solicitors just let this stuff go?

I'm worried because I don't want to lose the house but I don't think we can buy it without having these things fixed - or that the mortgage lender would even let us.

Richard_Webster

First, the house is a terrace with a shared access tunnel that we are supposed to have right of way to. However, the title was incorrectly drawn up so that the house has no rights to the tunnel whatsoever. (Solicitor says the rights are currently 'nonsensical')

A lack of access indemnity policy will do the trick and your solicitor should ask the seller's solicitors if their lender client will pay for one. They may not be prepared to do this, but it is worth trying. I could get one through Legal & Contingency for £95 for properties worth up to £150K. I assume there has been no actual problem in use of the access - talk to the neighbours about this.

I assume that you will have no rooms at first floor level over the tunnel so as to create a "flying freehold" issue.

Secondly, it used to be leasehold, and the freehold was bought by the lessee back in 1986, but it was never 'merged' properly - so apparently it would be both lease and freehold at the same time.

No problem here at all - a lot of properties like this. You treat it as freehold for all practical purposes including when you sell. The leasehold title is often preserved separately because there are rights in the lease that didn't come with the freehold. Not merging the freehold means that when you sell there will be an extra £4 in searches on your purchase and when you sell it was cost £8 more to obtain official copy entries. Hardly worth worrying about!

Correcting all this will take time, but as it's a repossession I'm worried that the vendor will still want us to complete with 28 days - I don't see how that can happen.

The "tunnel" problem is a common one - solicitors never seem to be able to get the wording right and it would take a long time to get it right because the neighbours would have to get involved together with their mortgage lenders, but lack of access is no big deal - people have probably been using it for years and one of the neighbours may be able to confirm this. In some places like Sheffield people don't use the front doors at all - even the postman delivers to the back door! It was probably too much trouble when previous owners bought. Indemnity insurance provides cover if anyone comes along and says you can't use it. Previous owners may have had such insurance but mortgage lenders may not have this with their papers, as this kind of document is often not kept by lenders these days.

I can't see this being an issue that would stop you exchanging as long as you are prepared to pay for a policy if the seller will not do so. Usually solicitors simply sort out these policies rather than confusing the lender with this level of detail, which, frankly, their staff don't understand.

So whilst it is an anomaly I wouldn't lose a lot of sleep about it as it certainly looks as if it is capable of being dealt with by indemnity insurance.

mistrihelen

Hi Richard - I didn't realise anyone had responded to this - thanks so much for doing so.

It looks like the seller is willing to pay for indemnity insurance in regards to the lease/freehold. The solicitor hasn't seemed to realise your point about the leasehold being preserved on purpose (and it not being a problem) but I suppose I can just let that one go if we are getting indemnity insurance anyway.

Apparently there is a flying freehold issue over the tunnel (it was mentioned off-hand in an email today) - I've read that this can cause problems with mortgage lenders - is this so? I think (but am not 100% sure) that 'our' house has at least some of the property over the tunnel.

Is it also correct that if we get these indemnity policies now, we won't have to pay for them again when we sell?

It is reassuring if these are common problems - I am dreading the legal bills going up and then the purchase not going through.

Thanks again

Richard_Webster

Apparently there is a flying freehold issue over the tunnel (it was mentioned off-hand in an email today) - I've read that this can cause problems with mortgage lenders - is this so? I think (but am not 100% sure) that 'our' house has at least some of the property over the tunnel.

Is it also correct that if we get these indemnity policies now, we won't have to pay for them again when we sell?

Usually the flying freehold issue is solvable by indemnity insurance. Most policies are perpetual and benefit successors in title. Two points here:

1. Cover will need to be upgraded by you by paying an additional premium if the property sells in the future for more than the amount of the cover.
2. Most insurers ask for a figure of how much you want the cover for, and mostly they work out their premiums in £50,000 bands. So say you are buying for £160,000 I would get the seller to pay for the cover but actually arrange it for £200,000 because it might well not be any more expensive! It is very annoying if you sell in a year or two for £180K and because the sellers arranged a policy for £160K (even though £200K wouldn't have cost them any more) you end up having to pay for a top up!

mistrihelen

Thanks yet again, Richard,

Unfortunately my solicitor says indemnity insurance will not resolve the problem: "I cannot see that it is appropriate to deal with the tunnel by way of insurance because, given that some of the first floor of the property actually flies over the tunnel, we have a situation where the seller simply doesn't have title to part of the house!"

From what I've read and what you've said here, they're wrong - insurance would cover it. Unfortunately the vendor's solicitors are useless apparently (they keep asking my solicitor to sort out quotes, etc, rather than do it themselves) so I can't see them pushing this point.

From what I can see, we're at a standstill. I can't see a polite way to tell my solicitors they could be wrong (and indeed as I am new to property buying and have no legal training I can't be sure they are). I just don't know what to do.

I don't really want to have to start over with another house (preferably one with no flying freehold!) just because of this one issue.

If anyone has any ideas I'd be extremely grateful.

Richard_Webster

If the description of the property in the title register does not include that part of the first floor room(s) over the tunnel then the seller may be able to prove a possessory title to it.

This area may be in the neighbour's title largely because the solicitors who drew up the documents years ago didn't take the trouble to get it right then. Your solicitor should look into the possibility of the title being rectified. The difficulty for you here is that as it is a repo you are not likely to get a lot of co-operation from the lender's solicitors.

It may be worth your solicitor ringing up the Land Registry and explaining the situation. If the neighbour is happy to concede that the rooms have never been in his occupation etc then if a LR surveyor looks at the houses and be happy it has obviously been like that for many years and the neighbours don't object you might get the title rectified. The issue would be to get the lender's solicitor to co-operate - and timescale - several weeks, I would guess at best...

mistrihelen

Richard, you are brilliant, thanks for your help.

But eeeep! I hope it's resolveable, or we are just throwing money away. I'm tempted to look at other properties, but I don't want to waste anyone's time.

Richard_Webster

I'm not promising it will work but it is worth your solicitor pursuing it...

mistrihelen

It's currently at a very disappointing standstill. My solicitor is waiting for the other side to do something (with a deed of variation???) and appears to not want to do anything itself (which may be fair enough, I don't know). They rarely respond to email - I asked simple questions about cost/whether we should look elsewhere and there was no reply in an entire week.

However, with the other solicitors being utterly rubbish, and ours being rather passive, I can't see how this can possibly progress.

We're seeing some other houses this weekend. They are more money for less space, but perhaps I'd actually be able to buy them rather than just talk about it.

If we do go for another house, I think I'll look into getting a new solicitor, which might cost me money but I don't have confidence in our current one.

Richard_Webster

Deed of variation will involve neighbour. Even if neighbour agrees in principle provided your seller pays costs, the sequence is something like this;

1. Seller's solicitor writes to neighbour with draft deed of variation suggesting he takes letter to his own solicitor.
2. Neighbour goes to see his solicitor (delay while he gets appointment).
3. Solicitor has to look at neighbour's title.
4. Solicitor writes to neighbour's mortgage lender asking if will agree to variation.
5. Wait for reply.
6. When eventually mortgage lender agrees they will charge admin fee (typically £100-£200) which your seller will be asked to pay
7. Seller agrees to pay admin fee
8. Neighbour's solicitor agrees wording of deed of variation.
9. Neighbour and seller sign deed.
10. Deed sent to neighbour's mortgage lender to sign.
11. Eventually deed comes back from neighbour's mortgage lender and the matter can proceed.

This is all going to take at least a month, if not more. Did the seller's solicitor try to see if the LR would wear going for rectification of the register? I must admit it is long shot but I have known it happen.