Help needed, freehold/leasehold problem

mose_2

Hi, Please bear with me as this is a bit long winded.

We put in an offer on a house for £208000 which was accepted, All good.

We have had a letter from our solititors saying there is a problem.
The letter says,

Historically the properties in this devolpment were sold as leasehold and then the majority of owners some time afterwards bought the freehold and then owning both the leasehold and freehold interests the leasehold interest was said to 'merge' and thus no longer exists.

There are sometimes delays in the merger of the two titles; if for example somebody had bought their leasehold interest for a substantial sum and perhaps mortgaged it. Later on they bought the freehold for a relatively small amount, normally a few hundred pounds but the two titles could not merge at that stage because there was a mortgage on the leasehold interest and not one on the freehold interest.

If the above events happened when the that person came to sell the property he would sell both the freehold and the leasehold interests. On completion of the sale the mortgage on the leasehold interest would be paid off and at that stage the two interests could mergeand all that would need to be done would be to specifically refer to both the freehold and leasehold titles in the contract.

In view of above when i had a look at the deeds of the property that you are now buying I would expect the deeds to say that the property is freehold and i would expect there to be no mention of any leasehold interest. Unfortunately that is not the case.

The deeds do show the property to be freehold but there is an entry on the deeds also that the freehold is subject to a lease dated 28th december 1956 for 99 years from 24th june 1954 so as far as the land registry is concerned the leasehold interest is still very much alive and without the leasehold deeds there is no way to find out who the owner of it is. It seems that somebody did not get the paperwork right sometime in the past and there now appears very little chance, if any, of that happening because nobody knows where the leasehold deeds are.

With this in mind the sellers have proposed that they take out an insurance policy as per the enclosed. you will see that the insurance policy protects the owner of the property and any mortgage lender up to a max of £208000 and if somebody came along and challenged your title by, perhaps, producing the leasehold docs you would have cover for up to that sum. It is important however to realise that it covers the property as it is now and would not extend to cover any new development, alterations or extentions.

Although the position is less than perfect, I think that the policy does cover any financial loss to you but the problem will not go away and whenever in the future you come to sell the property the proposed buyer will be making the same decision as you are now as to whether or not he is happy to take it on with the defecy on the title relying on the policy.


Ok thanks for reading. Heres the questions,


1. What will happen if someone turns up with the lease?
2. The policy is for £208k which is fine but in 20 years time the house could be worth £500k and we are only insured for £208k
3. What happenes in 44 years when the lease runs out? We cant renew a lease when we dont know who owns it can we?
4. Who will buy this hose from us in future as the lease expires?

We really don't want to pull out of this as we have sold and things were moving along nicely and we would of been in by november but this is a BIG worry.

PLEASE HELP!!!

Fire_Fox

Have you asked your conveyancing solicitor these questions?

mose_2

Fire_Fox wrote: »

Have you asked your conveyancing solicitor these questions?

No only got home late today to the letter on the doormat. Will be ringing them first thing monday morning. So worried now that we will have to pull out.

mose_2

Can anyone please shed any light on this for me? Really worried now.

blckbrd

Hi there,
You'll be able to acquire title information online via Land registry - Google it as I'm not allowed to post a link - registration required and fees involved.

hannalovell

As far as I am aware when a lease runs out and it is not renewed the prperty is then owned by the Freeholder...So if you stay in the house 44 years and no one turns up with the lease you will be fine but you need to make a decision as to whether you are willing to risk it?

mose_2

hannalovell wrote: »

As far as I am aware when a lease runs out and it is not renewed the prperty is then owned by the Freeholder...So if you stay in the house 44 years and no one turns up with the lease you will be fine but you need to make a decision as to whether you are willing to risk it?

Ok the sellers solicitor seems to think that there is a form I can sign to sign the lease over to me as it is unregisterd does this sound right? the seller bought the house from his nan and the lease got messed up along the way somewhere. Really dont want to take on a house if we cannot sign the lease over to us.

hannalovell

I think that is possible if it is unregisterred, good luck I hope all goes well.

zzzLazyDaisy

The best person to comment on this situation is Richard Webster, hopefully he will be along shortly.

However, in the meantime.......

Your solicitor is talking about an indemnity policy. It is very common in this type of situation. From what you say, the lease was indeed bought but not registered. So it seems unlikely that the original leaseholder will surface. But if they did, and financial cost to you would be covered by the indemnity policy.

Yes, it is true that when you sell, your purchaser will have the same questions. But you will take out an indemnity policy to cover your purchaser, and so it goes on.

If I was in your situation, personally it wouldn't worry me, but if you are in doubt, it is not too late to back out. Buying a house is probably the biggest purchase you will ever make, if it is going to play on your mind and worry you once you have moved in, then maybe this is not the house for you.

But do speak to your solicitor, hopefully s/he will be able to put your mind at rest.

mose_2

Yes, it is true that when you sell, your purchaser will have the same questions. But you will take out an indemnity policy to cover your purchaser, and so it goes on.


But it will put people off wouldn't it, I mean we are thinking twice.

Richard_Webster

I assume that what has probably happened is like this:

Lease granted in 1956 long before most parts of the country were areas of compulsorily registration. Lease gets transferred form one owner to the next (still unregistered) then lessee buys freehold but does so after first registration is compulsory so he gets a registered title to freehold. When he sells he brings in freehold deeds and the property changes hands, the buyer's solicitor wrongly not asking about the lease- so the leasehold deeds don't get handed over.

Or a variation - property is remortgaged and lender commissions factory conveyancing outfit to do it and they lose the leasehold deeds.

In either of these scenarios the person who had the lease got the freehold too so the lease got lost and it did not get "merged" as far as the Land Registry were concerned. In law acquisition of the freehold by the person who owned the lease would kill off the lease so it is very unlikely that there is anyone out there able to claim they own it.

More realistically the lease would entitle the lessee to possession of the property for the remainder of its term and the freehold subject to the lease only the right to collect ground rent etc during that period.

If the seller has been in possession of the proeprty for some years then it would be useful if they could do a statutory declaration as to their possession because it would be adverse to the right of any lessee. Possibly after 12 years of such continuous adverse possession you could obtain a possessory leasehold title and after a further 12 years this might be upgraded to absolute and then merged. Certainly Imagine your solicitor has been/will be talking to the Land Registry about how to deal with it in the future. My suggestion may be right or there could be another way of dealing with it to provide a lasting solution.

The indemnity policy may need to be upgraded on a sale in the future if the property goes up in value but this will be a one-off premium at that time.

In 44 years when the lease runs out , it runs out. If there is nobody there to renew it and nobody has been paying ground rent then it comes to an end and the Land Registry can be asked to remove reference to it on the freehold title which you or your successors would own. It follows that the expiry of the lease is a good thing for you and will certainly not stop people buying a house. Obviously if would be good if reference to it could be removed sooner than in 44 years time.