Freehold and Headlease Offer - Subject to Contract & Without Prejudice

lorrainebrook

I've received a letter from a Lease Management Company who are looking to sell the freehold/headlease for my property.  They are asking for £610 which includes Land Registry fee and their processing charges.  To get this moving they are asking for the full amount upfront.  Does anyone have experience of this?   Asking for the monies upfront  worries me, possibly going into a black hole and what that means for me.  Should I employ a solicitor which will cost more than the actual offer (doubling + the initial offer)   OR is it a simple process to cough up the monies and run with the 3-4 months to complete the purchase.  

eddddy

So  they are offering to sell you both the freehold and the headlease. I assume your property is a house.

Personally, I would employ a solicitor who specialises in freehold purchases to check over the details. For example, to check things like what covenants will be carried forward, and/or whether they can be removed. And also to advise of any potential problems if/when somebody wants to terminate the headlease and lease - to end up with a standard freehold house.

lorrainebrook

Thank you for your advice.  If they are stating:  ' £610 which includes Land Registry fee and their processing charges. '  Would you read this as picking up all Legal Fees at their end.  I've read a couple of articles whereby they state the freeholder wanting to sell will expect you (me) to pick up their Legal fees as well as my own. 
I certainly swaying to employing a solicitor - good advice

lorrainebrook

Yes the property is a house

eddddy

lorrainebrook said:

Thank you for your advice.  If they are stating:  ' £610 which includes Land Registry fee and their processing charges. '  Would you read this as picking up all Legal Fees at their end.  I've read a couple of articles whereby they state the freeholder wanting to sell will expect you (me) to pick up their Legal fees as well as my own. 

Yes - it would be normal for you to pay the freeholder's legal fees.  But I assume that "Processing Charges" means legal fees. Maybe they have an in-house lawyer who deals with it, rather than instructing an external solicitor.

You could ask them to confirm whether £610 is the total payment they would require from you, inclusive of all legal, administration and other costs.


FWIW, you mention that their offer is "Subject to Contract and Without Prejudice".  "Subject to Contract" means nothing they have offered is binding until contracts are signed and exchanged. (Like when somebody makes an offer on a house.)

"Without Prejudice" essentially means you can't use anything they say in the offer against them in a court case (but that's very unlikely to happen).

So in theory, they can change their minds about selling to you, or change their asking price etc (and you can do the same).

That kind of stuff is usually assumed anyway, but if you like you can  write "Subject to Contract and Without Prejudice" on your emails/letters as well.

princeofpounds

I wouldn't purchase your freehold/headlease as a lay person without a solicitor. It's technically possible but there may be devils in the detail that you will need explaining to you, too many to list - interests in land can come with liabilities, not just an asset.

It's normal to fund the legal fees for the freeholder, yet £610 sounds like a surprisingly low price for a freehold and legal fees. It's not impossible, but I wouldn't be surprised if something is being missed. Any idea how much your property is worth, how long your lease is, and what ground rent you pay?

Do not send money up-front without a solicitor.

I assume you are a single house?

lorrainebrook

The property is a terrace house worth around £115K.  Pay 91p per year ground rent.  Not sure about the term of the lease without digging out which I might need to do but guessing it's one of those 999 year leases.  I've owned the property since 2014 and currently rent out the property.  I was thinking to buy the lease may make the property more sellable if or when I decide. 

eddddy

Assuming the lease is approaching 999 years, and a ground rent of 91p - on paper the freehold and headlease are practically worthless.

But perhaps one benefit of buying them is that hopefully you'll be released from some leasehold covenants. For example, your lease might say you need consent from the head lessor to make alterations,and/or you're not allowed to extend the property (and/or you mustn't keep pigs in the garden).

"Not being allowed to extend the property" would be the type of covenant that you want your solicitor to ensure isn't carried forward to the freehold (but maybe you'd be less worried about the "pigs" one).

And like you say, maybe people like the idea of buying a freehold house rather than a leasehold house. But for that to happen, the headlease and sub-lease would need to be cancelled (which involves legal costs).

But if you currently have a mortgage, it will be secured on the lease - so you can't cancel the lease, unless your mortgage lender agrees to secure the mortgage on the freehold property instead (more costs etc).  So you could leave that until the property is sold.

lorrainebrook

Sounds like a mine field and not one to be touched.  Thanks for your advice it's much appreciated