House is leasehold and freehold..... how does that work?

SRRAE

We have just got our final contract regarding a house we are buying. All through the process we have been told it is a freehold.  The estate agent advertised it as freehold and a document signed by the person who who owns the house say it is freehold.

However the solicitor has listed it as leasehold and freehold and that we still require to pay ground rent.

How can something be leasehold and freehold? I have only read one article which I think is implying this can be caused by a purchase of a freehold not being correctly done.

Is there anything I can do to not require to pay someone ground rent which I don;t think they own.

TBG01

We have just got our final contract regarding a house we are buying. All through the process we have been told it is a freehold.  The estate agent advertised it as freehold and a document signed by the person who who owns the house say it is freehold.

Estate Agents know next to nothing about the property they're marketing. 

However the solicitor has listed it as leasehold and freehold and that we still require to pay ground rent.

See above re Estate Agent. The person acting in your best interest and responsible for checking the title has deduced that it is in fact a leasehold property.

How can something be leasehold and freehold? I have only read one article which I think is implying this can be caused by a purchase of a freehold not being correctly done.

Simple. Someone owns the freehold. Someone owns the leasehold. It's common.

Is there anything I can do to not require to pay someone ground rent which I don;t think they own.

Easy. You ask the vendor to prove they purchased the freehold. If they haven't you purchase it yourself.

RAS

Surely this should have come to light when your solicitor started work?

TBG01

RAS said:

Surely this should have come to light when your solicitor started work?

What implies it wasn't?

kingstreet

Are you sure you won't notionally be paying yourself? You can be both the leaseholder and the freeholder as they are separate legal entities. Buying the freehold doesn't automatically end the lease. It also means if you wanted to, you could sell the leasehold interest in the property in future and retain the freehold or vice versa.

user1977

Who owns the freehold? If the vendor does, and you're buying the freehold and the leasehold, none of this is a problem. 

eddddy

The reason this situation usually comes about is...

• Somebody originally bought a leasehold house...

• Then they bought the freehold of the house from the freeholder...

• So they owned both the freehold and the leasehold... and they are now selling both to you.

So you have 2 broad choices...

• 1) You could leave things as they are - so you'll own both leasehold and freehold - which probably isn't a problem.

• 2) Or you can ask your solicitor to extinguish the lease - so you just have the freehold. (But your solicitor would need to check that there aren't any rights in the lease, which aren't present in the freehold.)

You should probably ask your solicitor for a revised quote for each of those options - as both might be more expensive than your original quote.

Your mortgage lender might prefer option 2 over option 1.



Edit to add...

SRRAE said:

However the solicitor has listed it as leasehold and freehold and that we still require to pay ground rent.

Is the issue that the ground rent is onerous (i.e. unacceptable to your mortgage lender)?

That might be an issue for the mortgage lender, even if you own the freehold as well.

The mortgage lender might want the lease extinguished - or a deed of variation to 'formally' change the ground rent.

SRRAE

What most of you said is right. There is a freehold and leasehold and both will be purchased with the house. 
We have the option to sell the house and keep the freehold as they are separate entities.
It was just poorly worded on the cover note to the contract. It said with was both but stated the ground rent payment requirements.

So far no issues said from our mortgage lender but I wonder if they are aware.

Is there any benifit to eliminating the lease hold? 

eddddy

SRRAE said:

We have the option to sell the house and keep the freehold as they are separate entities.

I assume your solicitor mentioned that to explain why it can be a problem for mortgage lenders - if you did the opposite and sold the freehold but kept the leasehold -  and not because it was a suggestion of something you should actually aim to do.

SRRAE said:

Is there any benifit to eliminating the lease hold? 

• When you eventually sell, it would make the selling process a bit quick and cheaper (for both you and your buyer).

• How long is the lease? When it eventually only has, say, 80 or 70 years left - it may start to be a problem for mortgage lenders.

• What are the ground rent terms? If, for example, the ground rent escalates - it may become a problem for mortgage lenders.

So if the lease starts getting short and/or the ground rent becomes unacceptable, it would probably be sensible to get rid of the lease.

user1977

SRRAE said:

We have the option to sell the house and keep the freehold as they are separate entities.

Though note you can always do that if you own a freehold (by granting a new lease). All you'd be saving in this case is the time taken to draft a new lease. But it's not a normal thing to do (and even less so now there are restrictions on new ground rents).