Buying Leasehold House BUT Lease Is Missing - Advice Needed!

firsttimebuyer33

Hey! First time buyer and poster here!

Just looking for some advice/to see if anyone in a similar situation can tell us what outcome they had.

We are currently in the process of buying a Leasehold 2 bedroom victorian terraced house. We are at the point where we have received our mortgage offer, had our surveys done etc and were starting to get hopeful however our solicitor has flagged an issue to us regarding the Lease.

Essentially the lease for the property is missing. Our solicitor is currently in the process of trying to locate however we're not hopeful. The sellers solicitor is pushing us to accept an indemnity insurance policy to cover the missing lease, but we've been told given the circumstances that this probably won't be appropriate given the complex nature of the lease (several leases below freehold title, with the one we're buying at the bottom). As well as this the leasehold title is 'good' rather than 'absolute'.

We're not hopeful for the lease to be located as we get the feeling the sellers faced the same issue as us and took indemnity insurance. Obviously our mortgage lender will also be made aware of this information so may even withdraw their offer before we get a chance to decide for ourselves.

But we just wanted to get an idea of if this is a common occurrence, if anyone on here has been in the same situation and still managed to secure the house with a missing lease/what this has meant for you in the future?

We are aware we should probably walk away, may even get turned down by the bank and that we could be in the same situation when we come to sell the house which could devalue it massively too or only make it accessible to a cash buyer.

ANY advice hugely appreciated whilst we wait to hear back on the lease location! 

cattie

Personally I'd walk as I'd be considering how hard the place will be to sell in the future without the lease, which you're already aware could be a problem. Your solicitor is giving good advice rather than pushing you towards an indemnity policy, so listen to him & don't let the other side push you into anything.

GDB2222

What incentives are they offering you to buy this defective property? A really, really big discount? 

firsttimebuyer33

GDB2222 said:

What incentives are they offering you to buy this defective property? A really, really big discount? 

We initially went in over asking price which was obviously prior to finding out about this Lease issue 3 months down the line!

If our lender would even still consider lending and it comes back the lease is missing would it be worth even taking a chance on it with indemnity and go in with a revised lower bid given the devaluation this now has?

The lease has 800+ years on it and only apparent ground fees and charges are £10 p/y.

It’s in an area seeing huge regeneration in the coming years and my thought is someone is always going to buy the property regardless of the lease or not (assuming current owners have done that too) be that a cash buyer or slightly reduced price or is that naive to think?

gab3x

Just my opinion - 

Don't buy it, never buy a leasehold, let alone a leasehold with a missing lease.

It's not just about the ground rent it's a lot more than that - from maintenance, to issue resolve with other leaseholders to selling process where you need input from freeholder. 

NameUnavailable

When you buy leasehold you are in fact buying the lease. So you're thinking of buying a lease that can't be found and isn't on record at the land registry?

Sounds like a whole lot of trouble!

hazyjo

Is there a way to buy the freehold? Do they know who the freeholder is? Are they absent, or even still alive? I definitely wouldn't buy with an indemnity policy.

firsttimebuyer33

Thanks for the advice everyone! Will update once we hear back from out solicitor on the lease location but I guess it’s not looking good!

davidmcn

gab3x said:

Don't buy it, never buy a leasehold, let alone a leasehold with a missing lease.

It's not just about the ground rent it's a lot more than that - from maintenance, to issue resolve with other leaseholders to selling process where you need input from freeholder. 

That's a bit of a sweeping statement - would you say that applies where there's an ultra-long lease, the rent is a peppercorn, and there's never any involvement required from other leaseholders or the freehold for maintenance or anything else?

martindow

firsttimebuyer33 said:

The lease has 800+ years on it and only apparent ground fees and charges are £10 p/y.

How is this known - someone must have had sight of the lease?  If you are certain that it has a lease that long with minimal charges then maybe an indemnity policy would make sense. 

gab3x

davidmcn said:

gab3x said:

Don't buy it, never buy a leasehold, let alone a leasehold with a missing lease.

It's not just about the ground rent it's a lot more than that - from maintenance, to issue resolve with other leaseholders to selling process where you need input from freeholder. 

That's a bit of a sweeping statement - would you say that applies where there's an ultra-long lease, the rent is a peppercorn, and there's never any involvement required from other leaseholders or the freehold for maintenance or anything else?

Well our OP doesn't know this as there is no lease to find out.

More generally I would say never buy a leasehold even if it were as you describe above.
This is because as a lessee you are never really owning property and your lease can always be forfeited. Most leases contain a clause which allows the freeholder to forfeit the lease - or exercise a right of re-entry to the property - if the lease is breached by the lessee. Just so we're clear what this means - it means you lose all the £s you paid for the lease! Do you think it doesn't happen? Google it.

Through the lifetime of your possession of the lease you will face different points in which you will require actions on behalf of the freeholder. Say you want to sell - you won't find a buyer unless you get a LPE1 document from your freeholder as buyer's conveyancers will insist on it. But here's the catch - the freeholder is under no legal obligation to give it to you. If you don't know who the freeholder is or they are unwilling to issue you one then your only recompense is to go to court who will isssue one for you. This takes time and you're likely to lose your buyer. What usually happens is that you end up paying a lot of money to freeholder for them to issue you one. It is a perfectly legal case of blackmail.

Another complication is insurance. Freeholder is responsible for insuring the building - you are never 100% sure if they have done it and if they have got a fair deal for you. An example in London is freeholder of large luxury building charging leaseholders £1m annually for insurance premium yet £750k of that £1m he gets back from insurance as commission. This example is perfectly legal although very unfair.

Just because current leaseholder doesn't pay maintenance charges does not mean in future they won't appear and they won't be substantial. Buildings have to be maintained, problems need to be fixed but when you own a leasehold you are never in control of that process yourself so you don't decide on when to fix, how to fix or how much to pay for it. For example your freeholder might charge you £0 annually for maintenance but one year the roof needs replacing. That year you will pay thousands for the new roof as the cost is shared between all leaseholders (not the freeholder, unless they have a leasehold in that building). Look at the cladding scandal where individual leaseholders are now facing bills in 100s of thousands if they will ever have a chance to sell on their leasehold or remortgage.

Restrictive Covenants - you have to have a carpet, you cannot have a dog, you cannot have a window plant, you cannot dry your washing in your own garden (reminder that it is never 'your' garden)... as a leaseholder you are subject to a long list of covenants you must adhere to or you are in danger of forfeiting your lease with ultimate penalty of being kicked out and losing all the money you paid for that lease. 

Finally the price differential between freehold and leasehold is never so large as if to compensate for all the above. As a leaseholder you are nothing more than a tenant because you don't own the property you are living in.