Flat extension not showing/mentioned in lease plan - legal recourse?

Thriceguy

Hi all,

I am in the process of buying my first flat, and the following issue has come up:

The flat has an extension, with planning permission, building control sign-off, and consent from the freeholder (retrospective) all in place. However, the flat extension is not mentioned in the lease, and it in particular it does not show in a plan appended to the lease which shows the extent of the flat (ie a floor plan) - however, another plan appended to the lease confirms that the flat extension was build on ground that is part of the lease (it extends into the garden). For full context, the term of the lease has been updated since the flat extension was built (which presumably would have been an opportunity to update the lease plan).

My solicitor has advised to opt for an indemnity for an incorrect lease plan, but I am struggling to understand what legal recourse anyone - say the current or future freeholder or the council etc - would actually have. For example, would anyone have a legal right to ask for the extension to be taken down or similar? I asked my solicitor, but found their response unsatisfying: they said this is more or less a best practice issue, demanded by my mortgage provider, and that there is no legal recourse to be had because there is planning permission, building control sign-off, freeholder consent, and the flat extension was built on land that I would be leasing - but if that was true, why would my mortgage provider insist on it? The only alternative is to seek to amend the lease, but this may well add months and considerable further legal costs.

Any advice would be very much appreciated. 

Many thanks!

user1977

When you say the extension "does not show" on the plan, do you mean it is on land outside the lease demise, or it just wasn't shown as having been constructed on land demised to the leaseholder?

EssexHebridean

The lender is lending on the property, and currently as things stand the lease plan does not show the full extent of that property so a discrepancy is created between what is there, and what the lease says is there. This isn't particularly unusual, but the lender are taking a "belt & braces" approach by the sound of it. Your solicitor's response seems to me to be entirely appropriate. Ultimately a lender can ask for an indemnity policy as a condition of lending - you do have a choice about whether to go ahead with that though. You can agree, and pay the cost of that policy, or you can look elsewhere for your borrowing, although another lender may well take the same stance. 

If there has already been a deed of variation when the lease extension was granted, that was indeed the perfect time to have the Lease plan amended too - perhaps nobody felt it was worth the cost of having the plan redrawn at that time. 

Thriceguy

user1977 said:

When you say the extension "does not show" on the plan, do you mean it is on land outside the lease demise, or it just wasn't shown as having been constructed on land demised to the leaseholder?

Thank you - the latter: the extension was constructed on land demised to the leaseholder, but the lease mentions two plans: Plan A, which shows the flat floor plan itself and which defines the flat that is demised (this does not include the extension); and Plan B, which shows the grounds that are demised, including flat and garden on which the extension was build. 

The exact wording is:

The Landlord hereby demises unto the Tenant all

1. that the lower floor flat being the part of the building below and excluding the joists supporting the upper floor of the building and excluding the staircase leading thereto which flat is shown edged red on the plan annexed hereto marked "A" TOGETHER WITH

(i) the land at the front and rear thereof shown coloured red on the plan annexed hereto marked "B"

Plan A shows the pre-flat-extension floorplan, edged in red, and thus excludes the extension.

The area coloured in red on Plan B includes the land on which the extension was built.

user1977

So what’s the risk? Ground includes whatever is on it.

Thriceguy

EssexHebridean said:

The lender is lending on the property, and currently as things stand the lease plan does not show the full extent of that property so a discrepancy is created between what is there, and what the lease says is there. This isn't particularly unusual, but the lender are taking a "belt & braces" approach by the sound of it. Your solicitor's response seems to me to be entirely appropriate. Ultimately a lender can ask for an indemnity policy as a condition of lending - you do have a choice about whether to go ahead with that though. You can agree, and pay the cost of that policy, or you can look elsewhere for your borrowing, although another lender may well take the same stance. 

If there has already been a deed of variation when the lease extension was granted, that was indeed the perfect time to have the Lease plan amended too - perhaps nobody felt it was worth the cost of having the plan redrawn at that time. 

Thank you, this is helpful - yes, I am not saying the solicitor's response is inappropriate, and the insurance costs are to be paid by the seller anyway. My concern is that potential costs being covered by an insurance does not mean that it would not be a massive faff for me to deal with the consequences, so I am trying to understand who could bring any legal claims against me, on what grounds, and what exactly possible consequence could be.

For example, if the freehold was transferred to a different freeholder, could they demand the extension to be taken/down altered, because the extent of the flat differs from that shown in the lease? Could the current freeholder demand this (although they gave permission to the extension being built)? Could the council/registry/someone else bring claims?

Thriceguy

user1977 said:

So what’s the risk? Ground includes whatever is on it.

This is precisely my question - if there is no risk, why would the lender insist on a indemnity policy?

eddddy

From a different angle, if the leases haven't been updated to take account of the extension, there may be some 'grey arears'.

For example, with most leases (but not all)...

• the freeholder is responsible for insuring, maintaining and repairing the building (as it is described in the lease)

• The leaseholders are responsible for paying a share of the costs of  insuring, maintaining and repairing the building (as it is described in the lease)
  
  

With the "repairs and maintenance", it might just mean you have to deal with with repairs and maintenance of the extension yourself, and cover the cost. Plus contribute your share to the cost of maintaining and repairing the original building.

But it would be difficult for the freeholder to insure the original building, and you have a separate policy for the extension.

Conversely. if the freeholder takes out a policy to cover the whole building, and the inclusion of your extension increases the premium - the other leaseholders shouldn't have to contribute towards any part of the increase.

Thriceguy

eddddy said:

From a different angle, if the leases haven't been updated to take account of the extension, there may be some 'grey arears'.

For example, with most leases (but not all)...

• the freeholder is responsible for insuring, maintaining and repairing the building (as it is described in the lease)

• The leaseholders are responsible for paying a share of the costs of  insuring, maintaining and repairing the building (as it is described in the lease)
  
  

With the "repairs and maintenance", it might just mean you have to deal with with repairs and maintenance of the extension yourself, and cover the cost. Plus contribute your share to the cost of maintaining and repairing the original building.

But it would be difficult for the freeholder to insure the original building, and you have a separate policy for the extension.

Conversely. if the freeholder takes out a policy to cover the whole building, and the inclusion of your extension increases the premium - the other leaseholders shouldn't have to contribute towards any part of the increase.

Thank you, this is a very good point I had not thought about. My solicitor says the insurance covers the whole building (and indeed the text document only makes reference to the building at the relevant address - not to any lease plan or a specific floor plan). Do I understand you correctly that this would be unusual, or is this an instance where the "grey area" ventures into white more so than black?

eddddy

Thriceguy said:

Thank you, this is a very good point I had not thought about. My solicitor says the insurance covers the whole building (and indeed the text document only makes reference to the building at the relevant address - not to any lease plan or a specific floor plan). Do I understand you correctly that this would be unusual, or is this an instance where the "grey area" ventures into white more so than black?

It's usual / typical for a freeholder to have one buildings insurance policy that covers the whole building.

But if you think about the lease as a contract, in simple terms, it probably says something like:

• 1) "The freeholder promises to insure the building described in this lease"

• 2) "Each leaseholder promises to pay x% of the cost of insuring the building described in this lease"

So that might cause problems because the actual building is different from the building described in the lease. It's bigger, and probably more expensive to insure.

It's not ideal to have that discrepancy. It might create some 'headaches' in the future.

loubel

Personally I would want to have the Lease amended so that the extent of the flat is shown correctly. That way there is no risk of it coming back to bite you later.