Managed Freehold Property, Resisted as Both a Freehold & Leasehold

CameoCut

Hi everyone. I would be grateful for some property advice.

I am currently looking at a one bedroom mews house property and on the HM Land Registry it is listed as both a Freehold and Leasehold. The Estate agent describes the property as a Managed Freehold.

How does a Managed Freehold status affect your legal rights to the property and the land it is built on? Can anyone lay claim to the Leasehold part of the deed? The property has allocated parking and a small front garden, if that helps.

Thanks

ExEstateAgent

Does the vendor own the freehold and the leasehold?

It could be that they bought the freehold but didn't merge the titles so it still has a lease.

Or, it could be a 'normal' leasehold property, and the freehold is owned by another party (the freeholder).

Or, is it a shared freehold. Or it could have a head lease.

The EA should be able to provide more info really.

eddddy

"Managed Freehold" usually means it's a freehold house with some shared/common amenities.

Those share/common amenities might include things like a car park, private road, grassed areas, play areas, etc.

And you will probably have to pay a contribution each year towards the maintenance and repair of those areas.

If the estate agent is saying it's "Managed Freehold", but there is a leasehold and freehold title for the same house, that tends to suggest that the house was originally leasehold, and then the owner bought the freehold as well. (Are they both registered to the same owner?)

And the current owner will be selling both the leasehold and freehold to you.

If you want you could merge the leasehold and freehold title - so you are just left with a freehold title.

CameoCut

https://forums.moneysavingexpert.com/discussion/comment/82006637#Comment_82006637

Thanks ExEstateAgent, you've gave me some questions to ask the EA when I view the property next week.

I have contacted Wolverhampton City Council and the say the street has been ''adopted' and I've emailed Severn Trent Water to ask if they cover sewage etc as they would any-other street.

Amusing the street is covered by the council and water company as any-other, in your experience what is the likelihood of the Managed Freehold company putting up their charges by an astronomical amount in the future (currently £140pa)?

Thanks

CameoCut

https://forums.moneysavingexpert.com/discussion/comment/82006729#Comment_82006729

Thanks for the reply Eddddy.

Would the property being a Managed Freehold be a barrier to the Freehold and Leasehold being merged? I ask as I've read that a Leasehold cannot be merged if it would cancel someones Third Party rights (such as a Managed Freehold company?)

Thanks

eddddy

CameoCut said

Would the property being a Managed Freehold be a barrier to the Freehold and Leasehold being merged? I ask as I've read that a Leasehold cannot be merged if it would cancel someones Third Party rights (such as a Managed Freehold company?)

Yes - if your lease gives rights to a Management Company (or any other 3rd party), then that could block you from merging the freehold and leasehold. Unless the Management Company / third party gives their consent.

Is the lease between 2 parties (freeholder and leaseholder) or between 3 parties (freeholder, management company, and leaseholder)?

If you can't merge the freehold and leasehold, in theory, you could do a deed of variation - e.g. to extend the lease to 999 years, and reduce the ground rent to zero. But…

• If the lease is between 3 parties - i.e. including the management company - the management company would have to agree to sign the deed of variation.

• Whether the lease is between 2 parties or 3 parties - the freeholder and leaseholder would both have to sign the deed of variation - and in that case, the freeholder and leaseholder cannot be the same person (in law, you cannot make a contract with yourself). But, for example, if the lease is jointly owned by 'Alex' and 'Andy', and freehold is only owned by 'Alex' - that would be ok.

(But tbh, I'm not 100% certain about this stuff - so check it out with a solicitor. And I'm not sure that a 'pure play' conveyancing solicitor would be expert in this. You might need to check with a more specialist solicitor.)

CameoCut

https://forums.moneysavingexpert.com/discussion/comment/82008087#Comment_82008087

Hi Eddddy, thanks for your input, much appreciated. I'd like to ask a few more questions if I may.

As the property is described as a Managed Freehold, I'm assuming the management company is linked to the Freehold rather than the Leasehold and is between 2 parties. I'm viewing the property next week, so will ask.

Would leaving the Freehold & Leasehold separate have any adverse effects, such as making the property unsellable in the future or liable to a more expensive mortgage rate?

If the unmerged Leasehold then goes to 0 years, what might the consequence be?

Could someone make a future claim on either the unmerged Freehold or Leasehold?

Thanks

eddddy

CameoCut said

As the property is described as a Managed Freehold, I'm assuming the management company is linked to the Freehold rather than the Leasehold and is between 2 parties.

Being "Managed Freehold" doesn't imply that the lease is between 2 parties. It could be between 2 parties or 3 parties.

Just to emphasize - the term "Managed Freehold" usually means it's a standard freehold property, but you have to pay a service charge for the upkeep of the surrounding estate.

If the service charge is high, some people call this arrangement "Fleecehold".

Typically…

• if it was a 2 party lease (freeholder and leaseholder) - the lease would say that the freeholder has to maintain the estate, and the leaseholder has to contribute to the cost. (But the freeholder might hire a management company to do the work on their behalf)
• If it was a 3 party lease (Freeholder, leaseholder and management company) - the lease would say that the management company has to maintain the estate, and the leaseholder has to contribute to the cost.

But if things are done properly, when the house owner buys the freehold - a new deed is created which the house owner signs - saying that the house owner agrees to contribute to the cost of maintaining the estate. (Which should remove a potential barrier to merging the freehold and leasehold.)

So hopefully, that was done and you won't have any problems merging the titles.

CameoCut said

Would leaving the Freehold & Leasehold separate have any adverse effects, such as making the property unsellable in the future or liable to a more expensive mortgage rate?

When the lease starts getting short (maybe less than 80 years), that worries many mortgage lenders - even if you own the freehold. So then you'd probably want merge the titles, or extend the lease.

CameoCut said

If the unmerged Leasehold then goes to 0 years, what might the consequence be?

Then the leaseholder would hand the house back to the freeholder. But if you are both the leaseholder and the freeholder - that's not a problem. You'd be handing the house back to yourself.

CameoCut said

Could someone make a future claim on either the unmerged Freehold or Leasehold?

No.

CameoCut

https://forums.moneysavingexpert.com/discussion/comment/82009141#Comment_82009141

Thank you Eddddy, your help is very much appreciated. I am going to view the property Wednesday, so you have given me mucu food for thought.

I won't burden you with anymore questions lol.

Going to be a sunny bank holiday all being told, so have a great weekend 👍

theartfullodger

What does the lease say about these matters please?? Apologies but I can't read it from here..

(Eveen if vendor owns both freehold & leasehold titles there may be some obligations you need to know about.

CameoCut

https://forums.moneysavingexpert.com/discussion/comment/82009447#Comment_82009447

Hi theartfulllodger.

On EA advert the property is described as a Managed Freehold of paying a company an obligatory £140pa for upkeep of the surrounding grounds. Whether that is written in the freehold or the Leasehold, i will ask at the viewing on Wednesday, plus what those obligations are.