Is This Property Fraud?

helger

Background:

• property developer (freeholder) <--> housing association (head lease holder) <--> me (under lease holder)
• the property is former shared ownership flat, but I have already staircased to 100% share a few years ago
• I received a Property Alert from Land Registry that the housing association is about to register a financial charge on the head lease to raise finance

Question:
As the under lease holder, I have already staircased to 100% share a few years ago, so the housing association does not have any share on the property.

How can they first sold the leasehold property, and then uses that sold property again as collateral to raise finance after it was sold. This is clearly not right.
Is this Property Fraud? or is the housing association free to do whatever on their head lease? Do I have a ground to object this charge registration?

propertyrental

The fact that you now own 100% of your underlease has no impact on the Head Lease.

And the fact that the Head Lease owner wishes to raise equity against their Head Lease ad have the lender register a charge has no impact on your underlease.

helger

propertyrental said:

The fact that you now own 100% of your underlease has no impact on the Head Lease.

And the fact that the Head Lease owner wishes to raise equity against their Head Lease ad have the lender register a charge has no impact on your underlease.

What I do not understand is that how can the same property be used as collateral twice?

If the Head Lease owner uses the property to raise finance, wouldn't that mean I will not be able to raise a mortgage on my property?

For example, suppose the property worth 300K, the Head Lease owner uses it as the collateral to get a loan of 200K, surely that will affect my ability to get a mortgage on my property?

user1977

helger said:

propertyrental said:

The fact that you now own 100% of your underlease has no impact on the Head Lease.

And the fact that the Head Lease owner wishes to raise equity against their Head Lease ad have the lender register a charge has no impact on your underlease.

What I do not understand is that how can the same property be used as collateral twice?

If the Head Lease owner uses the property to raise finance, wouldn't that mean I will not be able to raise a mortgage on my property?

For example, suppose the property worth 300K, the Head Lease owner uses it as the collateral to get a loan of 200K, surely that will affect my ability to get a mortgage on my property?

No, it's a different property interest. The value of their lease already takes into account the sublease to you. It doesn't matter from your point of view whether they grant any charges over their interest (or similarly, whether the freeholder does that with the freehold).

propertyrental

helger said:

propertyrental said:

The fact that you now own 100% of your underlease has no impact on the Head Lease.

And the fact that the Head Lease owner wishes to raise equity against their Head Lease ad have the lender register a charge has no impact on your underlease.

What I do not understand is that how can the same property be used as collateral twice?

If the Head Lease owner uses the property to raise finance, wouldn't that mean I will not be able to raise a mortgage on my property?

For example, suppose the property worth 300K, the Head Lease owner uses it as the collateral to get a loan of 200K, surely that will affect my ability to get a mortgage on my property?

It's not 'the property' that is being used as collateral, it's the Head Lease. That has a value that is totally separate from the value of either the Freehold, or your underlease. Each of these has independent values/ Each can be bought or sold independently, and each can be used as collateral for a loan.

EssexHebridean

Your property now has its own title number - and that title is what you are the registered owner of. Your lease is granted out of a different title number though -  and that title is still owned by your freeholder. The headlease will have a group of properties on it as a rule - and each of those properties have their own title number they are registered under at the Land Registry. 

Any charge on your property appears on your title, and any finance taken by the freeholder against their property appears on their title, and doesn’t affect you. 

user1977

And for the avoidance of doubt, what you should have a property alert subscription for is the title number for your lease. I suggest you cancel the one you have for the head lease as you're just going to get distracted/worried by this sort of thing, which really has nothing to do with you.

propertyrental

user1977 said:

And for the avoidance of doubt, what you should have a property alert subscription for is the title number for your lease. I suggest you cancel the one you have for the head lease or the freehold as you're just going to get distracted/worried by this sort of thing, which really has nothing to do with you.

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eddddy

helger said:

Background:

• property developer (freeholder) <--> housing association (head lease holder) <--> me (under lease holder)
• the property is former shared ownership flat, but I have already staircased to 100% share a few years ago
• I received a Property Alert from Land Registry that the housing association is about to register a financial charge on the head lease to raise finance

Question:
As the under lease holder, I have already staircased to 100% share a few years ago, so the housing association does not have any share on the property.

How can they first sold the leasehold property, and then uses that sold property again as collateral to raise finance after it was sold. This is clearly not right.
Is this Property Fraud? or is the housing association free to do whatever on their head lease? Do I have a ground to object this charge registration?

Just for your own interest, you could find out more about the ownership structure of the whole development.

Typically, the background might be something like this:

• In order to get planning permission, the developer was probably told that they must offer some shared ownership homes. (The developer might not have liked this much - they prefer to just build homes and sell them. They don't want the faff of shared ownership.)

So, typically the ownership structure might be something like this:

• The developer owns the freehold of the entire development site. Most of the houses will be sold freehold and/or most of the flats will be sold leasehold (to 100% owners).

• One block (of say 10 flats) has to be sold on shared ownership. To avoid getting involved in all the hassle, the developer leases that block of flats to a Housing Association - so that's just one headlease for the whole block.

• Then the Housing Association sub leases each flat in the block and deals with all the work associated with Shared Ownership  - so that's 10 sub leases (but still just one headlease).

• So you've staircased to 100% ownership of your flat. But the housing association might still own 25%, 50%, 75% or whatever of other leases in the block - and they're all part of the single headlease.

So it's probably the Housing Associations shares of the other flats in the block which is security for the mortgage that they're taking out.


But that's just one typical example. It's possible that the ownership structure of your development is different.

helger

eddddy said:

• One block (of say 10 flats) has to be sold on shared ownership. To avoid getting involved in all the hassle, the developer leases that block of flats to a Housing Association - so that's just one headlease for the whole block.

In my case, there are 10 head leases for these 10 shared ownership, each head lease corresponds to an individual under lease.

But based on the above replies, I guess this still does not matter?

eddddy

helger said:

In my case, there are 10 head leases for these 10 shared ownership, each head lease corresponds to an individual under lease.

But based on the above replies, I guess this still does not matter?

OK - in that case the headlease for your flat will be worth very little. The going rate is probably about 15x the ground rent.

i.e.
If your ground rent is £200 per year - the headlease might be worth about £3000
If your ground rent is £0 - the headlease is worth about £0

So it's strange that the Housing Association are trying to raise a mortgage on it. But the chances that something fraudulent is going on are almost zero.  But as others say, it wouldn't affect you anyway.


Just a thought - have you actually seen the headlease for your flat? I mention it because some people use the Land Registry search, and apparently found a headlease for each flat, but they didn't realise that it was the same headlease being listed multiple times.