Buying a house which is freehold and holds a leasehold

Moofin

Hello,

I was just wondering if anyone has been in a similar position..

We're currently in the process of buying our first house which is a repossession.

The people previously bought it under a shared equity scheme by the looks of it. So they owned a percentage of the house and then the rest belonged to the housing association.

The house is now being sold and it includes the Freehold and the Leasehold. I've been told by our solicitors that the leasehold will not be able to be merged with the freehold because both hold different covenants. This seems odd to me as surely we'd own the freehold thus the leasehold covenants would be void?

It also states in the contract that we will still have to pay maintenance fee (I think to the Housing Association, I could be wrong). But surely if we own the freehold ground maintenance should no longer have to be paid.

I'm just wondering by having this leasehold attached to the property (plus a maintenance fee) if it's going to devalue the house when we come to sell it in a few years time.


I'm going to call the solicitor tomorrow and see if they can clear some of it up for me but I was hoping someone may have an experience or some insight into this - any thoughts are appreciated!

DVardysShadow

I know very little about this. But the first issue which come to mind is that the freehold and the leasehold my be owned by different parties in all of this, which would be something I would get to the bottom of anyway. I am assuming this is a building with a single dwelling, rather than some sort of apartment arrangement, which would require a freehold - leasehold arrangement. The other issue may be that the legal work required may be outwith the scope of your purchase.

As for the maintenance fee, this may be for estate rather than property maintenance? It would put me right off a purchase.

Moofin

Thanks for your reply - really appreciate it!

The property is a single dwelling - a 2 bedroom terrace house on a fairly new development (10 years approx).

From what I can understand from all the paperwork I've seen the previous owners owned 40% of the property and the housing association owned the remaining 60%. The owners had a mortgage for the 40% and then paid a rent to the housing association. However the property has been reposessed so I assume the HA now owns all of it again.

We're buying both the freehold and leasehold part so the property will be 100% ours but from what I've been told the freehold and leasehold won't be able to be merged. I can't fathom why the leasehold can't be merged since we'd be the freeholders anyway. The house is in a lovely location and would be a great first property for us but I'm thinking of resale since we're first time buyers and we'd likely move elsewhere in the next 3-5 years. It's just this leasehold/freehold business is the only thing that is putting a big questionmark over it!

I've been looking it up a lot online to see if I could find anyone in a similar position and by the sounds of it the freehold is called a 'freehold reversion'?

DVardysShadow

I would wonder whether the freehold and the leasehold don't match. They probably match to the degree that you can live there and it is mortgageable - but the leasehold carries obligations to the Housing Association or towards the Estate, which are outwith the freehold? This does match the explanation the solicitor has already given. Perhaps when you get a fuller explanation, you would post back?

ovoreo

I nearly purchased a place which was freehold but had a maintenance charge, this was for the developments upkeep (a few trees and a badger set). So annual charges are not limited to just leasehold. I'm afraid I know little about shared ownership schemes.

G_M

The shared ownership of the prevous ocupant is irrelevant, provided YOU are buying 100%. Are you sure you are not being offered a similar shared scheme?

My guess is that you are buying the leasehold outright, but a share of the freehold. The freehold may well be owned jointly by all the house-owners on the estate, so you get a share of that, not 100%. Under the lease you'd have to pay ground rent (and maintenance/service charges?) to the 'freeholder' (which might be a company of which you become one of the shareholders?), and you, like the other house-owners, are obliged to comply with various covenants in the lease.

But at the end of the day the only way to be sure is to read the lease, and read the contract, to see what you are buying and what commitments it involves!

If, on the other hand, the freehold only relates to your property, and you are buying it 100%, then any groundrent would, as you rightly say, be payable to yourself.

Moofin

Thanks to everyone who has replied :beer:

I just called our solicitor this morning and she's confirmed that we're buying both the leasehold and the freehold and the property will be 100% ours.

She says the reason why they can't be merged is because the freehold and leasehold have to have the exact same terms but at the moment they hold different covenents/restrictions and thus can't be merged. The leasehold and the freehold will appear on the land registry but we will own both.

Regarding the ground maintenance fee apparently the whole road has to pay it, so either its going to the housing association or the developer of the site.

Would you be put off buying a house which held a leasehold and a freehold title (the house would be 100% yours)? My solicitor said the covenents were pretty standard for new housing developments.