Buying Leasehold House - Freeholder Retrospective and Future Consent

iusedtoworkhere

Hi All,

We're about to exchange contract on a house purchase.

It's transpired the house is in fact leasehold, with a Good Leasehold Title and Landlord's Possessory Title as of 2016. Freeholder is Fairhold Ltd / Estates & Management.

Long leasehold remaining (900+ years) and low ground rent.

We want to extend/perform alterations. Some have already been done - kitchen extension/loft conversion by current/previous owner without the landlord's consent.

Conveyancing Solicitor's can't agree on the leasehold if consent is required, but it appears it is.

Should we get the seller to check if consent is needed with Fairhold?
If so, we can't get indemnity. And could take months?
What can we expect for retrospective consent if we were to deal with it?
What should we expect in terms of costs and timescales for future consent?
Does the Landlord's Possessory Title affect our ability to purchase the freehold after 2 years ownership, or otherwise?

It's assumed that purchasing the freehold before completion is not viable dut to the likely time it will take to resolve.

We would be grateful for any advice, as we're stuck in what seems like an impossible situation with limited time (keeping buyer happy) and spare resource for surprise financial troubles.

Or... are we just massively overthinking this and most people just get on with doing the work with a very low risk of a Freeholder based 200 miles away ever knowing....


Thanks.

The_Real_Cheddar_Bob

are you sure this is the house for you? I'm sure leasehold properties are worthwhile for some, but for me, its just long term renting.

What are the implications of not getting the permission you want and they find out?

eddddy

A couple of options to consider, if you want to buy the freehold:

• The current leaseholder can ask the freeholder if they will sell the freehold (i.e. without following the statutory process), and agree a price. That can often be done very quickly - e.g. before you complete your purchase.

• If you want to follow the statutory process, the current leaseholder can initiate it (assuming they've owned the house 2+ years), and pass the benefit to you. That way you don't have to wait 2 years.

Alternatively, if you don't buy the freehold...

In overview, a lease can say one of three things:

1. No Alterations
2. Alterations only with the freeholder's consent
3. Nothing (i.e. you can alter if you want without consent.)

If its 1, you have a problem.

If it's 2, legally, the freeholder can charge a 'reasonable' fee for granting consent (in advance or retrospectively). 'Reasonable' means it should reflect the amount of work the freeholder has to do in granting consent.

But some freeholders might 'take the mickey' and ask for a high fee, which doesn't reflect the work they have to do, which might result in taking them to a tribunal.

iusedtoworkhere

rwjr, I must admit it's not ideal but it isn't uncommon in the area we're in. More are freehold I think overall but there is a good number of leasehold. And we're not in a buyer's market... the choice is really limited for our wants and needs, and this otherwise fits the bill.

The implications are they want the retrospective consent fee, which should be £350-450 according to our solicitor. Or they take legal action for breach of the lease and seek costs, demolition of the work or even repossession at the extreme. Fairhold tried to take someone to court for failure to pay ground rent for a few years totalling <£50, and wanted repossession of the property. Thankfully they lost and the homeowner was awarded all his costs back.


edddy, on your first point it sounds like if an informal agreement could happen quite quickly it could work out well. It does mean however that if the freeholder declines then we cannot get indemnity insurance and we would probably pursue your second point.

If the seller initiates the transfer can this be overseen by the solicitor to ensure the sale completes as per normal and that the seller (who would eventually be the freeholder) is obliged to transfer the freehold to us?


The lease covenant for alterations is that freeholder consent is required in our case.

As above, our sol thinks ~£400 for retrospective consent but hasn't advised on future consent. From what I've read I would expect ballpark £1k - based on them charging: consent fee, architect to review drawings, solicitor fee, admin etc.

Although this is a complete guestimate based on limited stories of this company. I have read of horror stories where a different freehold invester tried to charge £5000 to a property owner who had a conservatory done 20 years ago!

eddddy

iusedtoworkhere wrote: »

edddy, on your first point it sounds like if an informal agreement could happen quite quickly it could work out well. It does mean however that if the freeholder declines then we cannot get indemnity insurance and we would probably pursue your second point.

If the seller initiates the transfer can this be overseen by the solicitor to ensure the sale completes as per normal and that the seller (who would eventually be the freeholder) is obliged to transfer the freehold to us?

I can't see why asking about buying the freehold would impact your ability to get indemnity insurance - you wouldn't mention any alterations to the property.

All 3 parties (buyer, seller, freeholder) would exchange contracts simultaneously, and then complete simultaneously. So there's no risk of you buying the leasehold without the freehold, or vice versa.

But... all this depends on the freeholder agreeing to the idea, and agreeing to a sensible price.

iusedtoworkhere

I can't see why asking about buying the freehold would impact your ability to get indemnity insurance - you wouldn't mention any alterations to the property.

One of the conditions of the indemnity policy is that "There has been no communication with anyone that might be entitled to enforce the restrictive covenants."

In effect, we'd be drawing attention to ourselves from the company that the insurance policy is trying to protect us from.

All 3 parties (buyer, seller, freeholder) would exchange contracts simultaneously, and then complete simultaneously. So there's no risk of you buying the leasehold without the freehold, or vice versa.

But... all this depends on the freeholder agreeing to the idea, and agreeing to a sensible price.

That's what we're worried about. If they don't want to sell, we have to then ask the seller to get retrospective consent as otherwise we have no protection. If they aren't willing to then the sale will likely fall through.

We want to mitigate the risk by proceeding with the best route, but every route seems to have a knock-on;

1). Proceed with the sale and get indemnity insurance. We could be likely to pay retro consent and would need future consent at cost... or risk it. Try to buy the freehold in 2 years. (Easiest short term but could cause problems long term).

2). Ask the seller to get retro consent at their expense. No chance of indemnity policy and still need future consent, which we still have no idea of the likely costs.

3). Ask the seller to buy the freehold informally i.e. without tribunal. If Fairhold won't sell then pursue tribunal process and get seller agree to transfer the freehold when they get it. This could cause major delays and would also void indemnity.

jojo17

I've just obtained retrospective consent from freeholder took total of 5 days £360.00.

iusedtoworkhere

Thanks for the info jojo.

Is that a private freeholder, or is it an investment company like Fairhold or similar?

jojo17

Simarc (prob read alot of horror stories) but ive never had a problem.Have a long lease left of 900+ years pay nominal ground rent per annum(never increases).

eddddy

iusedtoworkhere wrote: »

One of the conditions of the indemnity policy is that "There has been no communication with anyone that might be entitled to enforce the restrictive covenants."

Are you sure that's the complete clause?

Here's a similar clause from a policy:

It is a condition precedent to the Insurer’s liability for any payment under this Policy that the Insured shall not:

(a) disclose the existence of this Policy, other than to prospective purchasers, their mortgagees and their respective legal representatives

(b) communicate on any matter regarding the Restrictive Covenants with any party who is, or is believed by the Insured to be, entitled to enforce the Restrictive Covenants

i.e. You can communicate with the Freeholder, but not about alterations, indemnity insurance etc.

It would be pretty unreasonable to say that a leaseholder can't communicate with a freeholder about anything - like buying the freehold. (If you saw the freeholder in the street, would you have to cross the road to avoid talking to them!!!)

iusedtoworkhere

That's good to know jojo, it's at least some reassurance given the confusing situation we're in!

Are you sure that's the complete clause?

I had to double check as I thought you were onto something....but it reads as follows;

This quotation is provided on the understanding that:
1. The property has been used for the same purpose and remained unaltered for the last 12 months
2. There has been no communication with any person(s) or organisation that may be entitled to enforce the restrictive covenants
3. A full copy of the lease is available, with details of the leasehold restrictive covenants


However, I've been re-reading the lease and it is difficult to interpret. What are people's thought on the below;

"AND ALSO will not without first obtaining the consent in writing of the Lessors build or set up or suffer to be built set up or maintained on the hereby demised land any erection or building other than or in addition to the said demised dwellinghouse and buildings now erected thereon or others substituted therfor [sic] in pursuance of the aforesaid covenants AND ALSO...."