Leasehold Change Issue - Indemnity Insurance enough?

FTBSteve

Hi Everyone

We're trying to buy our first property, and have run into lease problems. We're getting conflicting information from our solicitor, and the estate agent, and are new to this, so wanted to get some experienced opinions!

The property is a leasehold flat, and the lease shows that it has one bedroom. The property has since extended into the eaves of the house, and is now two bedroom.

When we mentioned this to our solicitor, they said that a change of lease was required, otherwise the property would be unsellable. They will not continue with the sale as-is.

The estate agent instead believes that indemnity insurance (?) would be enough to cover the issue with the lease, and that a lease change was not required.

We have now come to a dead end. The seller is implying that they will look for other buyers, and believes that another buyer & solicitor would allow them to continue with the sale without changing the lease. I don't know enough to know if that's true, and it's our solicitor who is being difficult, or whether it would be an issue for any solicitor.

Does anyone know more about this?

Cheers!

Steve

eddddy

Hi FTBSteve

I suspect the situation is as follows:

- The flat is a 1 bedroom flat.
- The current owners are using space that doesn't belong to them for a second bedroom.
- That space probably belongs to the freeholder. If the freeholder finds out, he/she will probably either:
...... - take the space back
...... - offer to sell the space (on a new lease), at a price to be agreed

Some sellers and/or EAs would have said to you:

"This is a 1 bed flat, but the owners are using a second bedroom they don't own. If you want to carry on doing the same, don't mention the second bedroom to your solicitor, or the freeholder or anyone else. But if the freeholder ever finds out, you may lose the second bedroom. That's why the flat is cheap."

(I know of at least one EA who sold a flat on that basis. But it's a dodgy route to take - especially if you are getting a mortgage.)

But now you've mentioned it to your solicitor, I guess the options are:

1) Walk away
2) Get things regularised with the freeholder (i.e. it will revert to a 1 bed flat)
3) Find another solicitor and don't mention the 2nd bedroom (very dodgy!!!)


(Indemnity Insurance is irrelevant. That would be like me moving into your loft uninvited, and taking indemnity insurance against you wanting your loft back! No such insurance exists.)

FTBSteve

Thanks for the information!

The first bedroom (infact, the entire flat) is on the same floor, but this could well be the case that the eaves were not part of the property covered in the lease.

It seems like the sensible thing is to either let them update the lease, or walk away!

Thanks for all your help.

FTBSteve

(sorry for double post).

Having reviewed the lease, the conversion has taken place within the 'owned' area, it is just a conversion from "loft space" into a habitable room.

Does this change whether a lease change is needed? (Still not sure whether to trust the solicitor or not!)

Thanks!

eddddy

FTBSteve wrote: »

(sorry for double post).

Having reviewed the lease, the conversion has taken place within the 'owned' area, it is just a conversion from "loft space" into a habitable room.

Does this change whether a lease change is needed? (Still not sure whether to trust the solicitor or not!)

Thanks!

In which case, you need to find out which clauses in the lease the solicitor is unhappy with.

Could it be that the solicitor also thinks the current owner has 'stolen' the freeholder's space? (Obviously, the solicitor won't have seen the flat, so he/she may have jumped to the same incorrect conclusion as me.)

Or does the lease says something explicit along the lines of "you are not allowed to convert the loft".

The lease probably says the freeholder's permission is required for the conversion - but that doesn't mean the lease has to be changed.

The EA's comment also makes sense now. The 2nd bedroom may not have building regs approval - so your mortgage lender may want indemnity insurance for this. (And consequently, the mortgage valuer may decide to value it as though it was a one bed flat.)

FTBSteve

Really helpful, thanks for this!

eddddy

... and if the 2nd bedroom hasn't got building regs approval, you might want to get a surveyor to look at it, to see if it's safe etc. For example, it could have been a DIY botch job.

(Technically, the local authority would probably consider it to be a 1 bed flat, with a non-habitable storage room in the loft. But there are no laws against you putting a bed and furniture in a 'non-habitable storage room' and sleeping in it.)

Hoploz

It sounds to me a good idea to visit your solicitor with the full details, floor plan from the sale, lease etc, and have a face to face discussion about the situation. They don't identify issues with the sole purpose of preventing people buy houses, they just try and protect the buyer's (and the lender's) interests, so that everything is above board and all paperwork is in order.

camptownraces

One thing you could do before tomorrow is check the lease agreement, and the lease plan. (These are documents your solicitor will have sent you already).

1. Does the shape of the shaded area of the lease plan correspond to the whole area of the flat including the newly dreamt up second bedroom?

2. Does the lease agreement mention who is responsible for the loft space? [essentially that is what has been used for the bedroom]

If the answer to 1. is "yes" and the answer to 2. is "you", that's probably a hopeful pointer.

BUT you need to take solicitor's advice on this, you don't want to end up with a flat you can't sell.

Talc1234

FTBSteve wrote: »

When we mentioned this to our solicitor, they said that a change of lease was required, otherwise the property would be unsellable. They will not continue with the sale as-is.

The estate agent instead believes that indemnity insurance (?) would be enough to cover the issue with the lease, and that a lease change was not required.

Listen to your solicitor not the estate agent

FTBSteve

Frustrating!

The picture in the lease shows the flat as one bedroom, which is why the solicitor continues to believe this is a problem. Even though the space which became the second bedroom is within the demise, they think this requires a lease change.

As noted above, I should believe my solicitor, but does anyone have experience of this issue? I've since researched and found bad reviews of this solicitor, so have nagging doubts.
This is a lesson in why not to go with the solicitor the EA recommends!