Freehold house and leasehold garage

Countryboy

HI
I am presently selling my house (conveyance has been trundling along for four months). The stumbling block is the fact that my garage is underneath a coach house (peppercorn rent with 999 year lease) and the freeholder of the coach house is absent and rents out the property to tenants.

My solicitor has the freeholder's solicitors details and they have been trying to get in touch with her as our purchaser's solicitors need clarification on insurance etc. As this is now holding completion up I have suggested to my solicitor , to speed things along, that we supply some kind of indemnity policy to the purchaser regarding the garage. He doesn't seem to think that this will be sufficient. If this is the case then what will?

Richard_Webster

It may enable a builder to get another unit on his estate but these freehold/leasehold arrangements with coach houses are a disaster waiting to happen. It is difficult to get the average private individual to realise he has responsibilities as landlord, which he probably didn't want in the first place.

It might be possible to provide a Contingent Buildings Insurance Indemnity Policy but the solicitors would have to study the policy wording carefully to see that it covered this case.

Countryboy

Thanks for the reply Richard.

Under the advice of my boss (I work for an insurance broker) I have obtained a quotation for this type of insurance but my solicitor is very negative as to whether the purchaser's solicitors will accept this. I am waiting to hear from him today.

propertyman

" my car caught fire and the house burnt down - Mr Freeholder, can I have the insurance policy- what policy ?!"

The only half way acceptable solution is a covenant for the lessee to insure in their name and the lessor (freeholder) which can easily be obtained form the land registry.

It might be worth inserting that on assignment. It makes it simpler and easier for the coach house owner who, aware of the above, might happily sign it!

Oh, and it's "sorted" when you come to sell......

Countryboy

My solicitor has now been able to obtain insurance details from the freeholder which are acceptable to the purchaser's solicitors. They are now asking for confirmation that we pay no service charge and that there will never be any in the future.

Am I being dumb or something but surely any solicitor would know that with a peppercorn rent there is no service charge? All that we can be asked to contribute towards is the cost of the buildings insurance isn't it which is very minimal?

propertyman

Countryboy wrote: »

Am I being dumb or something but surely any solicitor would know that with a peppercorn rent there is no service charge? All that we can be asked to contribute towards is the cost of the buildings insurance isn't it which is very minimal?

Erm because ground rent (however low) and service charge are 2 different things.

You should be asking your solicitor to read the lease, not ask you...!

They will see if reserves service charge or a variable rent charge ( again not a ground rent) towards share of costs of maintaining the structure foundations roof drains perhaps the entrance driveway lighting etc, and of course insurance.

Only the lease will say...

Countryboy

Well as someone predicted, the disaster waiting to happen with this leasehold garage arrangement is about to happen I think. Purchaser is not happy that he could be hit with service charges in the future (although we have never been asked for any) and is considering pulling out because of it. All the freeholder's solicitor will provide is a letter saying that it is "unlikely" that the freeholder will ask for service charges in the future and he is just not accepting this which I can't say I blame him.

There are three lots of solicitors involved in this now - mine, purchasers and garage freeholders and it's driving me mad to think that none of them seem to be able to resolve this matter. Plenty of other houses on this development have been sold with the same arrangement and they have not experienced this problem.

propertyman

Then answer is as suggested ( as was the problem you are facing) is reading the lease for the garage and working out what you or a future owner are responsible for and to what do you contribute.

Only when you have established that can you and they work out if
a: the liability exists
b: the likely costs

and adjust the price and/or budget for it.

NB you will have to do this for the existing or any future sale.

The disaster that Richard forewarned was not that you would be charged, but that you wouldn't and insurance and or maintenance issues left unattended to led to a disaster, eg no insurance and no money in the kitty.