Leasehold advertised as Freehold - Advice Please

abc.xyz

Hi all, FTB here. I had an offer accepted on a property that was advertised as freehold. The estate agent’s paperwork and the contract of sale also stated that it was freehold, so I moved forward with the mortgage application and instructed a solicitor.

A few weeks later, my solicitor sent me the title documents. I noticed references to a leasehold, so I went back to my solicitor. They were also surprised because the contract clearly describes the property as freehold.

The estate agent/vendor came back saying that the property is in fact a leasehold with 90 years remaining, but they have an application in progress with Land Reg to purchase the freehold. The vendor is a building developer. The property was taken in part exchange and isn't itself a new build.

I’m annoyed because I feel misled, especially as I already have my mortgage offer and have paid money to my solicitor.

I asked for a legally binding guarantee that the property will be freehold on completion. They have provided a solicitor’s undertaking which simply states they will co-operate with any Land Reg enquiries. I wanted a clear commitment that they will secure the freehold and cover all associated costs, but my solicitor says they can’t be that specific. My solicitor says they are satisfied with the undertaking, but I’m not fully confident in their own competence as they didn’t even spot the leasehold issue in the first place - I did.

I’m now being pressured from all sides (including my solicitor) to exchange and complete, yet no one can tell me how long the freehold application will take or even whether the current freeholder has agreed to sell. From what little I understand about freeholds, the seller could refuse to sell or refute the price, and this could drag on for years. My concern is that after completion the vendor may lose interest or delay the process, and I could end up stuck with a 90-year leasehold that's difficult to resell.

What would you do in this situation?

Should I refuse to exchange until the freehold is sorted?

Would I have grounds to take legal action against the seller/estate agent if I complete and the freehold doesn't get resolved in good time?

If my solicitor charges me extra for dealing with the freehold situation, is it reasonable for me to ask the vendor to cover the additional fees given that I instructed my solicitor based on the property being freehold?

Any advice appreciated

MattMattMattUK

abc.xyz said:

Hi all, FTB here. I had an offer accepted on a property that was advertised as freehold. The estate agent’s paperwork and the contract of sale also stated that it was freehold, so I moved forward with the mortgage application and instructed a solicitor.

A few weeks later, my solicitor sent me the title documents. I noticed references to a leasehold, so I went back to my solicitor. They were also surprised because the contract clearly describes the property as freehold.

The estate agent/vendor came back saying that the property is in fact a leasehold with 90 years remaining, but they have an application in progress with Land Reg to purchase the freehold. The vendor is a building developer. The property was taken in part exchange and isn't itself a new build.

I’m annoyed because I feel misled, especially as I already have my mortgage offer and have paid money to my solicitor.

I asked for a legally binding guarantee that the property will be freehold on completion. They have provided a solicitor’s undertaking which simply states they will co-operate with any Land Reg enquiries. I wanted a clear commitment that they will secure the freehold and cover all associated costs, but my solicitor says they can’t be that specific. My solicitor says they are satisfied with the undertaking, but I’m not fully confident in their own competence as they didn’t even spot the leasehold issue in the first place - I did.

I’m now being pressured from all sides (including my solicitor) to exchange and complete, yet no one can tell me how long the freehold application will take or even whether the current freeholder has agreed to sell. From what little I understand about freeholds, the seller could refuse to sell or refute the price, and this could drag on for years. My concern is that after completion the vendor may lose interest or delay the process, and I could end up stuck with a 90-year leasehold that's difficult to resell.

What would you do in this situation?

Should I refuse to exchange until the freehold is sorted?

Absolutely. 

abc.xyz said:

Would I have grounds to take legal action against the seller/estate agent if I complete and the freehold doesn't get resolved in good time?

Almost certainly not.

abc.xyz said:

If my solicitor charges me extra for dealing with the freehold situation, is it reasonable for me to ask the vendor to cover the additional fees given that I instructed my solicitor based on the property being freehold?

You can ask, they may or may not agree.

abc.xyz said:

Any advice appreciated

Walk away.

user1977

Your story's a bit confused - if "they have an application in progress with Land Reg to purchase the freehold" then surely that means they have already completed the purchase of the freehold? So you are buying a freehold, the only "glitch" (if it even is that) is that the seller's LR application is still being processed. I would listen to your solicitor.

twopenny

I would only complete the purchase when the freehold is finalised.
You could tell them you are happy to sign once this happens.
If they aren't willing to agree then maybe it's going to take longer than you or they want or maybe it's not assured and they want to pass the buck.

Yes you stand the chance of loosing what you have paid so far but if you go through with it and the freehold doesn't come through you might loose on the value at resale.

I'd also change your solicitor. He didn't spot that and point it out to you.
Was he recommended by the seller?
I've worked in 2 solicitors firms and that would never happen.

jaybeetoo

Does your mortgage company know it’s leasehold with 90 years left or is the mortgage offer based on it being freehold?

eddddy

This sounds like a standard "Freehold on completion" purchase.

abc.xyz said:

I asked for a legally binding guarantee that the property will be freehold on completion. 

You will get that automatically - it's part of the contract that you and the seller both sign.

abc.xyz said:

They have provided a solicitor’s undertaking which simply states they will co-operate with any Land Reg enquiries.

That sounds like they're saying if there's technical problems with registering the freehold, the seller's solicitor will help to get those technical problems resolved.

abc.xyz said:

no one can tell me how long the freehold application will take or even whether the current freeholder has agreed to sell. From what little I understand about freeholds, the seller could refuse to sell or refute the price, and this could drag on for years

The seller's solicitor (and your solicitor) wouldn't allow contracts to be exchanged if the seller didn't have the right to sell you the freehold.

Solicitors don't let their clients sell property that they have no right to sell.

It's correct that Land Registry could take months to complete the registration, and it's not really possible to predict the timescale.

abc.xyz said:

I had an offer accepted on a property that was advertised as freehold. The estate agent’s paperwork and the contract of sale also stated that it was freehold, so I moved forward with the mortgage application and instructed a solicitor.

Yes - you're correct that the estate agent should have made it clear that the property was "Freehold on completion".

There are probably 2 possible approaches to your purchase...

• 1) The lease is extinguished - so you just end up with the freehold title

• 2) The lease remains - so you end up with 2 titles... the leasehold title and the freehold title

If it's option 2, your legal fees might be much higher. (And maybe you'll incur more legal fees if/when you later extinguish the lease.)

EssexHebridean

The Land Registry application currently in progress can be expedited on the basis that it is required for the sale. Should be done inside 10 days then, subject to any requisitions that arise. 

mlz1413

Is the seller (a developer) buying the freehold or is the house/flat getting the freehold?

If the developer buys the freehold then the property remains a leasehold,  just with a new person to pay ground rent and services to.

I wouldn't go any further until you get what you have asked for which is the freehold for that property.

Definitely consider walking away.  Better to lose a few hundred now than own something worth £'000s less and need to renew the lease in 10 years (under 80 years on a lease and you get struggle to get a mortgage) which will also run to £'000s

Grumpy_chap

twopenny said:

I would only exchange contracts to agree complete the purchase when the freehold is finalised.
You could tell them you are happy to sign once this happens.
If they aren't willing to agree then maybe it's going to take longer than you or they want or maybe it's not assured and they want to pass the buck.

Yes you stand the chance of loosing what you have paid so far but if you go through with it and the freehold doesn't come through you might loose on the value at resale.

I'd also change your solicitor. He didn't spot that and point it out to you.
Was he recommended by the seller?
I've worked in 2 solicitors firms and that would never happen.

Fixed that for you