Land Registry Issue Scuppering House Sale

Northernsoul123

I'm at the point of exchange of contracts on sale of my house after 5 months. The buyer is now refusing to proceed for the following reason:

My house was shared ownership/leasehold when I initially bought 50% through a solicitor. I stair cased up to 100% and then registered my ownership of the freehold at the Land Registry myself without using a solicitor (I know now that this was stupid and has caused this but there is no point going over it now). I did not realise until now that there were both leasehold and freehold titles still in existence on the property side by side; they should have merged and become one freehold after I purchased but this didn't happen. 
My solicitor reassured me that this is irrelevant; that the house is in fact 100% freehold and since I am now effectively my own landlord the leasehold is to all intents and purposes defunct. They told me initially that the buyers solicitor would apply to have a merge done on completion and I had thought there wouldn't be much of an issue.
The thing I do not understand is they also said they were "almost certain" but "could not guarantee" the merge would be approved after completion. This is what has put my buyer off.
They also said if I applied for a merge myself it may not be approved at all (as there is no "intent"?).
The buyer will now not sign until after the merge has taken place and may in fact drop out.
I asked my solicitor if my house was therefore unsaleable and they said not at all; the issue was with the buyer who was being unreasonable.
I am obviously very worried; not just about the buyer not signing but about what happens next if they pull out. I need to know the following:

Is this a common situation and does anyone have any idea how to get out of it?
Why can the solicitor not be certain the merge will happen after completion?
Is there anything I can do (contact MP etc.) to get the Land Registry to allow me to do the merge?
Is it possible to get an indemnity policy to cover the slight chance that the merge was not allowed after completion?
Can it be really possible I've bought a house outright but will never be able to sell it as the Land Registry won't merge the titles and so nobody will want to buy it?

BonaDea

Why would nobody want to buy it if the titles weren't merged?  On buying your flat they'd just be buying both the leasehold title and the freehold title.  I agree with your solicitor, your buyer is being unreasonable.  Would adding a Deed of Variation to each title to say it had to go along with the other (ie that one could not be transferred without the other) do the trick for your buyer?

eddddy

Based on the info you've given, it sounds like your house should be saleable - and your buyer is being unreasonable and/or pedantic.

But there will be some considerations for your buyer:

• The buyer's solicitor will need to do a lot more work - i.e. transfer 2 titles (freehold and leasehold), then merge the titles

• That will be a lot more legal fees for your buyer - and/or if your buyer is using a 'conveyancing factory', they might say they don't do things like merge titles.

• If your buyer told their mortgage lender that the house is leasehold, they'll have to get their mortgage offer changed - which will probably involve a revaluation

• Is there anything about the lease that would make it unmortgageable? For example, high ground rent or short period left?

And there is usually no requirement for your buyers to merge the freehold and leasehold anyway - they can just keep them as 2 separate titles, if they want. Sometimes there are benefits to doing that.

Northernsoul123

Thanks so much for both replies. To clarify re your comments, the property is a house and there is no ground rent and the original lease was long. My buyer is using a local solicitor. The house is 100% freehold according to my solicitor; the leasehold title is obsolete so I don't think this would affect a mortgage but if it would maybe this is something that is worrying the buyer?

Also:
I have already offered through my solicitor to cover any expenditure the buyer might incur due to this issue.
My solicitors have even offered to do all of the work for free for them. They don't want that.
Their own solicitor has sent out the final report and has agreed with my solicitor that there is no issue.
The buyer simply does not like the idea of there being a leasehold and a freehold.

Thank you for the comment about the Deed of Variation - I will ask my solicitor about this.

Does anyone know why it is only "almost certain" that the two titles can be merged after completion. I don't understand what the scenario might be where they can not be merged. I know this is one of the problems causing this and if the buyer knew 100% they could merge this could change their mind.

user1977

Your solicitor’s advice is correct, contacting your MP because your buyer is being difficult would be absurd.

Northernsoul123

user1977 said:

Your solicitor’s advice is correct, contacting your MP because your buyer is being difficult would be absurd.

I know but I am desperate! 😅 Myself and the person I was wanting to buy from have been sat in our respective houses surrounded by boxes waiting for exchange of contracts for weeks now.

I was meaning to ask my MP to write to the Land Registry if they will not merge the titles as I was thinking this could stop me selling my house to anyone at all but as my solicitor has told me this does not seem to be the case anyway; it is just this particular buyer who is not happy.

Any other ideas you think might resolve this?

lookbook

Moral of the story - always pay for legal services. 

Northernsoul123

lookbook said:

Moral of the story - always pay for legal services. 

As I stated I already am aware of that. I am looking for helpful advice. Have a great day!

BarelySentientAI

Northernsoul123 said:

The house is 100% freehold according to my solicitor; the leasehold title is obsolete so I don't think this would affect a mortgage but if it would maybe this is something that is worrying the buyer?

If the mortgage is secured against the leasehold, then the lender might be slightly worried that if the leasehold title suddenly vanished then they wouldn't have any security for their loan.

Northernsoul123 said:

Does anyone know why it is only "almost certain" that the two titles can be merged after completion. I don't understand what the scenario might be where they can not be merged. I know this is one of the problems causing this and if the buyer knew 100% they could merge this could change their mind.

See above.  If a lender has a charge on a leasehold title, they need to be satisfied that they will have a charge on the freehold title after the merge before allowing the leasehold title to vanish.

A condition for a title merge is that any charges on the leasehold title are removed (which essentially means paying off the mortgage on the leasehold title). 

Your solicitor also won't guarantee something that they are not in control of - that would be a silly thing for a legal professional to say.  There will always be weasel words like "likely", "probably", "almost certain" etc.  I use them myself in almost every official correspondence I make.

Of course, I'm only guessing what your buyer might be thinking about - they could just be panicking because it's not a 'normal' transaction in their head.  We see all sorts of odd questions when someone is overreacting through misunderstanding.

RHemmings

Northernsoul123 said:

user1977 said:

Your solicitor’s advice is correct, contacting your MP because your buyer is being difficult would be absurd.

I know but I am desperate! 😅 Myself and the person I was wanting to buy from have been sat in our respective houses surrounded by boxes waiting for exchange of contracts for weeks now.

I was meaning to ask my MP to write to the Land Registry if they will not merge the titles as I was thinking this could stop me selling my house to anyone at all but as my solicitor has told me this does not seem to be the case anyway; it is just this particular buyer who is not happy.

Any other ideas you think might resolve this?

I'm surprised that nobody has paged: @Land_Registry here. They are an official representative of the Land Registry, and give a lot of very useful advice in this forum. 

Reading the thread as a whole, I agree that the buyer is being over-cautious. But, a house purchase is a huge major life event and a lot of many people's finances (and therefore future) are tied up in it. A lot of the concerns I have about 'something wrong' with a property are not because I'm worried myself (indemnity policies can be cheap, where applicable), but because I'm worried that future buyers may be put off. 

Northernsoul123

Thanks so much for your replies.
For clarification there is no mortgage attached to my property - it is owned outright.

Re the comments about "almost certain" etc. I did suspect the solicitors were just covering themselves saying this. Unfortunately this has spooked the buyer and they have it in their head that there is something "wrong". My solicitor has told me that their solicitor was on the phone to them for over an hour trying to explain there was no problem. They won't accept that but neither have they pulled out; this has now been dragging on for weeks.

The person I am trying to buy from has said they feel all we can do is set the buyer a deadline and then we should remarket our house if they don't sign. They are prepared to wait for a couple of months. But I am worried this same scenario could happen again and I don't want to waste everyone's time and money.

I appreciate the link to @Land_Registry and would love to hear from them. I cannot understand why they are likely to refuse a merge if I ask for it myself (this is what my solicitor has told me). This would solve all of the problems if it was expedited. Why are they likely to refuse; it seems unfair when a house sale is at stake.

I even woke up in the night thinking what if I sold my property to my partner, achieved the merge, and then he sold it on to the buyer! I know it sounds ridiculous but I feel completely stuck and can't see how to resolve this.