Buying a house we thought was freehold, but is leesehold

sjs205

Hello all,

We are in the process of buying a property in Southampton, it is a 3 bed semi, we have had the valuation carried out on it and this is based on the property being freehold - as we believed it was.

Yesterday we received the contract from the vendors solicitor and found out that the property is, in fact, leasehold, with a 1000 year rent free lease starting from 1870. Based on this we have a few questions.

I spoke to a friend who has brought and sold quite a bit of property and he said that we could always acquire the freehold and that since this was a no rent, long lease freehold, the value of it would be minimal. Is this so?

Based on the fact that the property is leasehold rather than freehold, does this instantly decrease the value of the property? and this valuation from the mortgage company?

We have contacted the estate agents and said that we may not want to proceed due to these issues, and would only consider going ahead if the landlord purchased the freehold before hand. They have since said that the seller has agreed to get an indemnity policy since the landlord may be absent and so they may not be able to easily acquire the freehold.
a) What does this indemnity policy actually mean in this scenario?
b) If the landlord isn't absent, how easy would it be to get the freehold - with the landlords agreement?
c) What implications could this have on a sale in the future?

Basically, this is our first home and we are looking to do a bit of work and then think about selling it in 5+ years with the hope of making some money and moving up the ladder. The value of the property is okay when compared to the other properties is the area, but not having a freehold make me think that this may not be worth the initial valuation.

Any helps or thoughts on this matter would be greatly appreciated.

Best regards,

Steven

kingstreet

Such a lease is usually as good as freehold and the valuation won't be affected.

You might want to have a read of the lease, or ask your solicitor if it has any restrictive or onerous covenants you'd wish to avoid.

It wouldn't bother me, but each to their own...

[Deleted User]

I agree, if the landlord is absent, there's no ground rent and the lease is that long then it's not really any different to freehold.

As I understand it, if the freeholder is totally absent then the property become bona vacantia (i.e. the freehold passes to the Treasury http://www.bonavacantia.gov.uk) but you should check with your solicitor as I'm not an expert. In which buying the freehold (if you still want to) should be relatively hassle free but might take a while. Asking the vendor to get it done before selling will cause big delays, and they have no incentive to get it done.

TrickyDicky101

What has your solicitor said on the matter (have you asked him/her)?

sjs205

Hello all,

Thank for getting back to me. We have since found out from the solicitors that the landlord is probably not absent since the lease is held with Chamberlain Estates.

Does this make much difference to the previous views?

Another issue that has since come to light is that a strip of land the full length of the plot, to the right of the house - approx 17' wide - is not actually part of the area outlined by the plot, and hence, not under the deeds. However, the previous vendor has used this since she first moved in in 1975, and signed a statutory deceleration that they have been using it in 1996.

My main concern is that if this is owned by - and I would guess it is - the freeholder, they could if they wanted to, use this strip of land along with a section of our plot to develop an additional house. There has already been some development at the back of the house in the last 10 years, and we were led to believe that the vendor sold this land for the development, we now know, however, that this was not the case.

Any views on this?

We have now said to the estate agents that unless we get the main plot as freehold we are probably not going to proceed... And we don't mind hanging on a couple of months for this as this would give us a chance to save some money to do some of the work needed. But it is the perfect property for us.

Another question, if we were to buy this as leasehold, and then attempted to buy the freehold, is there any sort of guide to the actual value of the land? The property was valued as a freehold property at £163,500 but it is a large plot, approx 30m x 8m (not including the strip). I have heard that this will have minimal value due to the long rent free lease... but to what extent? couple of K? 5K? 10K+? Any ideas?

Any help would be appreciated.


Many thanks,

Steven

Richard_Webster

If the lease was from Thomas Chamberlayne to George Hunt then nobody knows who presently owns the freehold - Chamberlayne Estates deny all knowledge of it. There are many Chamberlayne leases where the freeholder is now unknown and others belong to a surveyor in Stratford on Avon who will generally sell the freehold for around £600.

A local solicitor will know the position. What road is the house in?

If it is a 1000 year lease with minimal ground rent for a large area like 1/- per year plus 6d for every 1000 bricks burnt on the land then in real terms the lease is a good as a freehold.

sjs205

Richard_Webster wrote: »

If the lease was from Thomas Chamberlayne to George Hunt then nobody knows who presently owns the freehold - Chamberlayne Estates deny all knowledge of it. There are many Chamberlayne leases where the freeholder is now unknown and others belong to a surveyor in Stratford on Avon who will generally sell the freehold for around £600.

A local solicitor will know the position. What road is the house in?

If it is a 1000 year lease with minimal ground rent for a large area like 1/- per year plus 6d for every 1000 bricks burnt on the land then in real terms the lease is a good as a freehold.

Hello Richard,

Thank you for your response, that does help.

The property is located in North East Road. And the rent is free.

So if the freeholder is absent, and the freehold does not belong to a surveyor in Stratford, and we wanted to buy the lease; I understand that in this scenario, we would have to pay the value of the of the freehold into a pot to cover the freeholder coming forward at a later date. Do you think this could be quite a bit of money? Or do you think approx £600 is a good value of this based on the long lease?

Many thanks,

Steven

Richard_Webster

If there is no ground rent then the freehold will only be worth a small amount - maybe £50-£100 at most but the legal and surveyor's costs (£2,000?) of going through the statutory enfranchisement procedure makes it not worth while in most cases. Unless the lease contains restrictions on building etc (and these can be overcome by an indemnity policy) then why spend the money?

sjs205

Richard_Webster wrote: »

If there is no ground rent then the freehold will only be worth a small amount - maybe £50-£100 at most but the legal and surveyor's costs (£2,000?) of going through the statutory enfranchisement procedure makes it not worth while in most cases. Unless the lease contains restrictions on building etc (and these can be overcome by an indemnity policy) then why spend the money?

Thank you Richard, that all sounds perfect.

I now appreciate that this is as good as a freehold, however, we still want to be able to call the land ours, as silly as that is. With this in mind, how long do you think it would take if we get the vendor to purchase the freehold before we completed? Or rather, how quickly could this go ahead, or how long could it delay the purchase?

Also, if we did move in there without the freehold, and then decided to purchase it, would we have to wait two years before we could?

Many thanks,

Steven