Lease hold structure is complicated.

MotleyLou6

Hi all,

I’m currently in the process of buying a leasehold house in England and would really appreciate some advice or insight from anyone with experience of complex leasehold setups.

The property I’m buying is a house (not a flat), but the title is layered. I’d be acquiring two leasehold titles:

• A 125-year residential lease granted in 2008 (with about 104 years remaining)
• A 999-year lease from 1899, which sits above the 125-year lease (this lease acts as the landlord title)

The freehold is owned by a third party, and is not part of the sale.

My solicitor has advised that I’m acquiring both leases, but has not confirmed whether I can extend the 125-year lease informally. I’m also still waiting for the full lease documents to confirm whether there are restrictions around this.

There’s a Good Leasehold title issue affecting the 999-year lease, and an indemnity policy is being arranged to cover this.

My main concerns:

• The 104 years remaining on the residential lease may make it harder to sell in the future if I don’t extend it
• I’m unsure how off-putting the layered leasehold structure might be to future buyers or mortgage lenders
• I haven’t been able to get a clear estimate of the cost to extend the lease due to the complexity of the setup
• My mortgage broker recently advised me or at lease hinted not to proceed, warning that this could be an issue in 10–20 years’ time

Has anyone dealt with a similar layered leasehold setup? Would it be risky to continue without having the lease extended by the seller before completion? Or is this fairly common and manageable if I get the right legal support?

I’d really appreciate any advice — thank you!

eddddy

You use the term "layered lease" - but maybe it's more common to describe the layers like this:

• Freehold
• Headlease (or intermediate lease)
• Sub-lease (or lease)

Is the headlease and sub-lease for exactly the same extent of the property (i.e. one house and all it's land)?

(Typically, a headlease would be for multiple houses, and the sub-lease for just one of those houses.)

Do you know the history of why this arrangement exists for this house?

MotleyLou6 said:

My solicitor has advised that I’m acquiring both leases, but has not confirmed whether I can extend the 125-year lease informally. I’m also still waiting for the full lease documents to confirm whether there are restrictions around this.

Unless there is something unusual about your leases, if you own a 999 year headlease with a 104 year sub-lease...

... you are free to extend your own 104 year sublease up to 999 years.

(In simple terms, you can say to yourself "Please extend the lease" and you can answer yourself "yes")

You would need consent from your mortgage lender, but I can't see them refusing.




BUT... there may be a stumbling block...

• Extending a lease technically involves granting a new lease - and I don't think you can grant a new lease to yourself.

So are you buying jointly? If so maybe "Alex and Charlie" could jointly own the sublease, but only "Alex" owns the headlease. Then "Alex" can grant "Alex and Charlie" a lease extension.

(Or there are other ways around it...)

DullGreyGuy

MotleyLou6 said:

Hi all,

I’m currently in the process of buying a leasehold house in England and would really appreciate some advice or insight from anyone with experience of complex leasehold setups.

The property I’m buying is a house (not a flat), but the title is layered. I’d be acquiring two leasehold titles:

• A 125-year residential lease granted in 2008 (with about 104 years remaining)
• A 999-year lease from 1899, which sits above the 125-year lease (this lease acts as the landlord title)

The freehold is owned by a third party, and is not part of the sale.

My solicitor has advised that I’m acquiring both leases, but has not confirmed whether I can extend the 125-year lease informally. I’m also still waiting for the full lease documents to confirm whether there are restrictions around this.

There’s a Good Leasehold title issue affecting the 999-year lease, and an indemnity policy is being arranged to cover this.

My main concerns:

• The 104 years remaining on the residential lease may make it harder to sell in the future if I don’t extend it
• I’m unsure how off-putting the layered leasehold structure might be to future buyers or mortgage lenders
• I haven’t been able to get a clear estimate of the cost to extend the lease due to the complexity of the setup
• My mortgage broker recently advised me or at lease hinted not to proceed, warning that this could be an issue in 10–20 years’ time

Has anyone dealt with a similar layered leasehold setup? Would it be risky to continue without having the lease extended by the seller before completion? Or is this fairly common and manageable if I get the right legal support?

I’d really appreciate any advice — thank you!

Does the same person currently hold both the leases or are you purchasing it from two separate entities?

Does the older lease only cover the same property or is it broader?

Tracet74

For the 125 year lease, you should consider enfranchising under the 1967 Act as opposed to extending the lease as you are only entitled to a 50 year extension when the ground rent would then increase to a modern ground rent.

eddddy

Tracet74 said:

For the 125 year lease, you should consider enfranchising under the 1967 Act as opposed to extending the lease as you are only entitled to a 50 year extension when the ground rent would then increase to a modern ground rent.

That wouldn't apply to the OP - based on what they've said.

It appears that the OP would be their own landlord. So they are free to grant themselves a lease extension to 999 years, with zero ground rent - if they want.

(... or more accurately, an extension to whatever is left of the 999 year head lease.)
  

bouicca21

For clarification, who owns the freehold? Is the freeholder known (sometimes with very long old leases the freeholder can’t be traced).

Ditzy_Mitzy

eddddy said:

You use the term "layered lease" - but maybe it's more common to describe the layers like this:

• Freehold
• Headlease (or intermediate lease)
• Sub-lease (or lease)

Is the headlease and sub-lease for exactly the same extent of the property (i.e. one house and all it's land)?

(Typically, a headlease would be for multiple houses, and the sub-lease for just one of those houses.)

Do you know the history of why this arrangement exists for this house?

MotleyLou6 said:

My solicitor has advised that I’m acquiring both leases, but has not confirmed whether I can extend the 125-year lease informally. I’m also still waiting for the full lease documents to confirm whether there are restrictions around this.

Unless there is something unusual about your leases, if you own a 999 year headlease with a 104 year sub-lease...

... you are free to extend your own 104 year sublease up to 999 years.

(In simple terms, you can say to yourself "Please extend the lease" and you can answer yourself "yes")

You would need consent from your mortgage lender, but I can't see them refusing.




BUT... there may be a stumbling block...

• Extending a lease technically involves granting a new lease - and I don't think you can grant a new lease to yourself.

So are you buying jointly? If so maybe "Alex and Charlie" could jointly own the sublease, but only "Alex" owns the headlease. Then "Alex" can grant "Alex and Charlie" a lease extension.

(Or there are other ways around it...)

That's my reading of the situation, too.  Surely, in a circumstance whereby both leases are acquired, the underlease could be extinguished by means of merger with the reversionary estate - i.e. the buyer becomes both tenant and subtenant so rolls the second lease back into the first one.

OP: was there, at one point, a secondary landlord sitting between the freeholder and final leaseholder?

If there wasn't, then I'd suggest that someone's got it wrong on the seller's side and you need to look into the matter further.  You probably do anyway!  I just get the feeling there might be more to this.

N.B.: one can be one's own tenant, but one doesn't have to be.  

eddddy

Ditzy_Mitzy said:

Surely, in a circumstance whereby both leases are acquired, the underlease could be extinguished by means of merger with the reversionary estate - i.e. the buyer becomes both tenant and subtenant so rolls the second lease back into the first one.

Yes - that might be possible.  I guess things to consider are...

• Are there any rights mentioned in the underlease which aren't mentioned in the headlease?

• Are there terms in the headlease which make it impossible to extinguish the underlease? (e.g. because the headlease makes lots of references to the underlease.)

TBH, I'd say this kind of stuff needs to be investigated by a specialist Leasehold solicitor. It's almost certainly beyond the expertise of a conveyancing solicitor.


Maybe another way forward is to acquire the freehold (using the Leasehold Reform Act), then look at extinguishing both leases.

But the OP mentions "Good Leasehold title" and "Indemnity Insurance" for the Headlease - which suggests that the current freeholder might not be traceable. That shouldn't stop the OP buying the freehold, but it might make the process much more expensive and time consuming.

user1977

eddddy said:

Tracet74 said:

For the 125 year lease, you should consider enfranchising under the 1967 Act as opposed to extending the lease as you are only entitled to a 50 year extension when the ground rent would then increase to a modern ground rent.

That wouldn't apply to the OP - based on what they've said.

It appears that the OP would be their own landlord. So they are free to grant themselves a lease extension to 999 years, with zero ground rent - if they want.

Or rather, their seller could grant them the lease...