House being sold with Freehold AND Leasehold titles

trusaiyan

Hi 
I wonder if you can help with some advice.
My relative is purchasing a property which we were told is 'definitely freehold'. He claims he purchased the freehold a few years ago. 
However, we have now discovered this is not fully true and while he did purchase the freehold, the leasehold interest still exists, and so the sale would be for BOTH titles. We are concerned about this for several reasons (not least because it is not true that we are only purchasing a FH property).
We have confirmed that both the LH and FH interests pertain to exactly the same plot of land (i.e. it is not a property in which the driveway is leasehold, house freehold etc). Both titles are title absolute. The LR lists both titles and you can download a copy of the title register for both.
We therefore have these questions:

1. Under normal circumstances, when someone buys the freehold to their leasehold house, what happens to the leasehold title (I assume it is automatically, or normally, extinguished so that only the freehold title exists)? 
2. What would the typical reason be for maintaining the leasehold interest when the individual purchases the freehold interest of their home and has no intention to leasing the property to anyone?
3. Is it possible the leasehold title was mistakenly not extinguished/merged with the freehold title when the seller purchased the freehold interest a few years ago, either because of a miscommunication or the solicitor didn't correctly inform the LR etc (the seller claims he didn't know both titles still exist and thought he had purchased the freehold as per typical circumstances)?
4. I am aware that under some circumstances the leasehold interest may have rights/easements/obligations/covenants that are not contained with the FH interest that would be beneficial to keep or difficult to simply extinguish, i.e a right of access to a path, or an obligation to pay for common areas that for whatever reason is not contained in the FH interest. However, if it is determined that there is no such differences and all rights/obligations are the same as in the FH interest, is there any other reason why you wouldn't want them merged?
5. What are the downsides of NOT merging or extinguishing the leasehold title, and instead purchasing BOTH the FH and LH titles to the exact same property/land? Could mortgage lenders not want to lend as it has two different titles? And could it increase costs for mortaging, insurance, LR costs etc? Do you agree it makes sense to merge them if the LH is effectively redundant?
6. What are the typical costs/process of merging the LH and FH interest before the sale to my relative who will be the new owner (i.e is it a simple application to the LR, or does it require the courts)?

Any help appreciated, thank you

davidmcn

Given the amount of detail your relative wants advice on, it would probably make more sense for them to talk directly to their solicitor rather than seek our advice (via you). But in short, I can't see there is any fundamental difficulty if they are acquiring both the leasehold and freehold interests to the same property.

trusaiyan

She will be getting full legal advice if she wants to proceed further, but ideally wants these general questions answered first which may be available in places like here.

Grumpy_chap

Lots of detail and your Solicitor will explain, but in summary:

• Property had freehold title owned by A.  Receives charges such as ground rent from B.
• Property has leasehold title owned by B.  Pays charges such as ground rent to A.
• B buys the freehold title from A.
• B now owns the freehold title and the leasehold title.  Both titles continue to exist unless fee (small) paid to the land registry to terminate the leasehold title.  The charges such as ground rent still exist but it would be B paying B, which is obviously just a legal anomaly.

So long as the purchase is for freehold and leasehold, nothing to worry about and the sensible thing is to normalise this when the Solicitor is dealing with the house purchase and land registry filing.
Nowt to worry about though

greatcrested

trusaiyan said:

Hi 
I wonder if you can help with some advice.
My relative is purchasing a property which we were told is 'definitely freehold'. He claims he purchased the freehold a few years ago. 
However, we have now discovered this is not fully true and while he did purchase the freehold, the leasehold interest still exists, and so the sale would be for BOTH titles. We are concerned about this for several reasons (not least because it is not true that we are only purchasing a FH property).
We have confirmed that both the LH and FH interests pertain to exactly the same plot of land (i.e. it is not a property in which the driveway is leasehold, house freehold etc). Both titles are title absolute. The LR lists both titles and you can download a copy of the title register for both.
We therefore have these questions:

1. Under normal circumstances, when someone buys the freehold to their leasehold house, what happens to the leasehold title (I assume it is automatically, or normally, extinguished so that only the freehold title exists)? 
2. What would the typical reason be for maintaining the leasehold interest when the individual purchases the freehold interest of their home and has no intention to leasing the property to anyone?
3. Is it possible the leasehold title was mistakenly not extinguished/merged with the freehold title when the seller purchased the freehold interest a few years ago, either because of a miscommunication or the solicitor didn't correctly inform the LR etc (the seller claims he didn't know both titles still exist and thought he had purchased the freehold as per typical circumstances)?
4. I am aware that under some circumstances the leasehold interest may have rights/easements/obligations/covenants that are not contained with the FH interest that would be beneficial to keep or difficult to simply extinguish, i.e a right of access to a path, or an obligation to pay for common areas that for whatever reason is not contained in the FH interest. However, if it is determined that there is no such differences and all rights/obligations are the same as in the FH interest, is there any other reason why you wouldn't want them merged?
5. What are the downsides of NOT merging or extinguishing the leasehold title, and instead purchasing BOTH the FH and LH titles to the exact same property/land? Could mortgage lenders not want to lend as it has two different titles? And could it increase costs for mortaging, insurance, LR costs etc? Do you agree it makes sense to merge them if the LH is effectively redundant?
6. What are the typical costs/process of merging the LH and FH interest before the sale to my relative who will be the new owner (i.e is it a simple application to the LR, or does it require the courts)?

Any help appreciated, thank you

A huge amount of anxiety/energy being expended for little good reason. As others have said, if the conveyancer is half-decent all will be explained. But for what it's worth my totally amateurish view is

1) sometimes the lease is extinguished, sometimes not

2) moneysaving? laziness? forgetfullness? can't be bothered? Lack of benefit?

3) Yes, that is one possibility

4) See 2) above

5) Marginal. Not heard of it happening. Yes. Yes.

6) Approval of any mortgage lender involved (6 weeks?), application to LR (8 - 12 weeks); no court; minimal cost.

trusaiyan

Thank you for all the replies they are very helpful.  We are just trying to be careful with our money, considering English property law is highly complex and opaque and it is easy to be stung hard.
Final questions then:

1. Would it be preferable to insist the seller extinguishes the LH interest BEFORE we exchange contracts, or is this something our solicitor should do with the LR? 
2. If the seller refuses to do this, what should we do? Purchase both titles then immediately apply to extinguish the LH title? There are mortgages registered against both interests (the same mortgage I assume), and we have not yet determined if there are any rights/easements that would be lost in getting rid of the LH title.
3. If for whatever reason it is determined that the LH title cannot be extinguished (because of obligations or rights that would be lost), is there any legal liability in NOT paying the ground rent to ourselves as owners of both titles? 
4. Is it not true that in the vast majority of freehold reversion purchases (as they relate to houses) that the LH title is extinguished/merged with the FH title, and it is therefore abnormal for them to both continue if he never intended to lease the property to anyone in the future?
5. Does anyone know what percentage of freehold reversion purchases do NOT extinguish the LH title?

Thanks again

Grumpy_chap

trusaiyan said:

First off, stop worrying. This is routine and your conveyancing Solicitor will sort it with their eyes closed, hand behind the back and closed down for coronavirus.
Final questions then:

1. Would it be preferable to insist the seller extinguishes the LH interest BEFORE we exchange contracts, or is this something our solicitor should do with the LR? 

Up to you which order you do it in, but I would get on with the purchase and then sort out after completion.  It is only an admin task.  This is particularly so at the moment when Land Registry are essentially closed because of coronavirus and have a massive back-log.  We have a completion from 9th April that has not gone anywhere.  Do you really want to drag the whole process out, risk losing the property and maybe miss the reduction in stamp duty?

1. If the seller refuses to do this, what should we do? Purchase both titles then immediately apply to extinguish the LH title? There are mortgages registered against both interests (the same mortgage I assume), and we have not yet determined if there are any rights/easements that would be lost in getting rid of the LH title.

Purchase both titles then immediately apply to extinguish the LH title.  Mortgage issue is a formality.
There are no rights / easements that can be lost by getting rid of the LH title.  Only the freeholder can grant rights or easements to the leasholder and the freeholder cannot grant something that they do not have in the first place,

1. If for whatever reason it is determined that the LH title cannot be extinguished (because of obligations or rights that would be lost), is there any legal liability in NOT paying the ground rent to ourselves as owners of both titles? 

OH YES!!!  You (freeholder) can sue yourself (leasholder) for non-payment.  In return, you (leaseholder) can counter-sue yourself (freeholder) for failure to meet their obligations.  The good thing about this is, after all the legal fees are covered, you will be signing the house over to the solicitors and won't need to worry about either the freehold or the leasehold ever again.

1. Is it not true that in the vast majority of freehold reversion purchases (as they relate to houses) that the LH title is extinguished/merged with the FH title, and it is therefore abnormal for them to both continue if he never intended to lease the property to anyone in the future?

Who knows?  Who cares?

1. Does anyone know what percentage of freehold reversion purchases do NOT extinguish the LH title?

Who knows?  Who cares?

Good luck

greatcrested

OH YES!!!  You (freeholder) can sue yourself (leasholder) for non-payment.  In return, you (leaseholder) can counter-sue yourself (freeholder) for failure to meet their obligations.  The good thing about this is, after all the legal fees are covered, you will be signing the house over to the solicitors and won't need to worry about either the freehold or the leasehold

Dont forget the appeals process....

So what happened to the property you were buying last year, with the rent charge you needed reassurance about but then queried all the reassurance you received? You do seem to pick properties with nice legal anomalies you can start a debate over....

Grumpy_chap

It's times like this that being a Gemini really helps!

trusaiyan

greatcrested said:

OH YES!!!  You (freeholder) can sue yourself (leasholder) for non-payment.  In return, you (leaseholder) can counter-sue yourself (freeholder) for failure to meet their obligations.  The good thing about this is, after all the legal fees are covered, you will be signing the house over to the solicitors and won't need to worry about either the freehold or the leasehold

Dont forget the appeals process....

So what happened to the property you were buying last year, with the rent charge you needed reassurance about but then queried all the reassurance you received? You do seem to pick properties with nice legal anomalies you can start a debate over....

I purchased the house and took out missing rentcharge indemnity insurance (well they paid for it). It was impractical, would take too long, too costly and the seller wasn't prepared before sale to carry out an adverse possession of rentcharge claim (redeem the renthcarge). However, on further looking into it, the current government have claimed they will repeal/reform section 121 of the 1925 Act which currently allows a lease to be created over the freehold for non-payment of a rentcharge. When this happens hopefully this year or next most of the risk will be gone anyway I think.

This house is one a very close relative is purchasing, and is completely separate and does exist (nothing is made up here for the purposes of wasting my life in internet forums, trust me ).

unkle

When I bought my current house it had both leasehold and freehold. Originally the freeholder was the crown, but the previous owner bought the freehold some 35 years earlier. It was very simple, our solicitor just closed down the leasehold element.