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Property Leasehold issue

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Walkeia
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Property Leasehold issue

#313172

Postby Walkeia » May 28th, 2020, 9:48 pm

I find many posts on this forums insightful and food for thought, therefore I'd like to know what people would do in my shoes and explain the situation I have found myself in.

I purchased a freehold investment property (lower levels & freehold). The upper floors we thought had been sold off leasehold prior. The main investment rational for the investment was decent yield with fall back development potential on part of the land. The leasehold floors are empty and require development. It was all running smoothly for a fair while; then the owners of the upper floors approached and offered for sale the upper levels but we declined, after considering it, due to the work involved and it didn't fit with the timing of potential development which will be a few years away and was a fall back option for the property.

It has come to light the upper floor leasehold is invalid and cannot be registered with the land registry. Why this issue was not resolved before I became freeholder and before / when monies were exchanged I do not know, nor if it was the solicitor or the prospective buyer at fault. The relationship between us I would describe as fine but terse; until been aware of the above issue I have found them uncooperative and unwilling to help resolve matters - maintenance / insurance etc. This makes somewhat more sense if they were fully aware of the lease issue; I was not, so found this frustrating.

I was advised to and have sort legal advice. Indicatively, their understanding is I am the legal owner of the entire property. I have been asked to think how I wish to proceed and what I want: attempting to gain vacant possession; gaining ownership via negotiating a price which reflects the value to me; changing the lease terms; signing and walking on or simple refusal and continuation of the situation I was unknowingly in - all deemed potential options.

I appreciate the above is a synopsis as to give all details would be a huge post. This is pretty new so I actually don't know what to make of it myself at the moment - so I'm in no rush to make a decision.

Thank you in advance for any thoughts

Mike4
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Re: Property Leasehold issue

#313196

Postby Mike4 » May 28th, 2020, 11:44 pm

I'm finding it difficult to grasp the nature of the situation. Is this a block of residential flats, a commercial premises, or what? I think it will make a difference as the court will be far less likely to grant possession of defective residential leases than commercial, which in turn impacts on the strength of your position.

I'm not sure what you mean you declined the sale of the upper floors. If leases have been granted, it is surely nothing to do with you other than you need to approve the assignment of the leases, approval not to be unreasonably withheld. Do you perhaps mean you declined to buy them back in?

The bit about the upper floor leases being unable to be registered with LR troubles me particularly. Can you not just issue new leases with the defect rectified, or are you hoping to have the leases cancelled and get the floors back gratis? Please expand on this.

Loads more questions will come, but answering these will be a start.

modellingman
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Re: Property Leasehold issue

#313288

Postby modellingman » May 29th, 2020, 10:56 am

Walkeia wrote:I purchased a freehold investment property (lower levels & freehold). The upper floors we thought had been sold off leasehold prior. The main investment rational for the investment was decent yield with fall back development potential on part of the land. The leasehold floors are empty and require development. It was all running smoothly for a fair while; then the owners of the upper floors approached and offered for sale the upper levels but we declined, after considering it, due to the work involved and it didn't fit with the timing of potential development which will be a few years away and was a fall back option for the property.

It has come to light the upper floor leasehold is invalid and cannot be registered with the land registry. Why this issue was not resolved before I became freeholder and before / when monies were exchanged I do not know, nor if it was the solicitor or the prospective buyer at fault. The relationship between us I would describe as fine but terse; until been aware of the above issue I have found them uncooperative and unwilling to help resolve matters - maintenance / insurance etc. This makes somewhat more sense if they were fully aware of the lease issue; I was not, so found this frustrating.

I was advised to and have sort legal advice. Indicatively, their understanding is I am the legal owner of the entire property. I have been asked to think how I wish to proceed and what I want: attempting to gain vacant possession; gaining ownership via negotiating a price which reflects the value to me; changing the lease terms; signing and walking on or simple refusal and continuation of the situation I was unknowingly in - all deemed potential options.



Like Mike4 I am a little confused. I have pulled out three central paragraphs of your post.

I presume this is England and Wales because the laws in other parts of the UK are potentially quite different.

I also presume that this is a building where you purchased the freehold of the entire building and as part of this became the lessor (landlord) of the upper part of the building under an existing lease. The lessee (tenants) under that lease subsequently(?) offered to sell you their interest in the lease but you declined.

For brevity, you haven't said why the lease covering the upper floors is invalid and cannot be registered with the land registry. As you may have discovered, not all leases can be registered with the Land Registry. I stress that IANAL but my understanding is that any lease with a term of less than 7 years cannot be registered but that does not make it an invalid lease. So without going into too much detail, a little more information about the problems with the lease might be helpful - in particular, how did you discover it was invalid and what is the main reason for its invalidity.

The second paragraph above has a little bit of ambiguity in it. I presume you mean "seller" rather than "prospective buyer" and you are referring to the lessee as the other party in the "relationship between us" and as the "them" and "they" towards the end of the paragraph.

Where the real ambiguity needs clarification though is in the third paragraph. Whose understanding are you referring to and who is asking you about your thoughts on proceeding? Is it your legal adviser or the lessee? If it is the lessee what has your legal adviser said? And is it the same legal adviser who acted for you when you purchased the freehold?

In terms of the options you list, I'm not quite sure what "signing and walking on" means? Signing what? The other aspects you make no mention of are the commercial terms of the lease - in particular its term and the amount of time left on this term and the rent, if any.

Apologies if I appear to be nit-picking at your post. That is not the intention. There is a lot that is unclear (to me at least) and this response is just my attempt to seek some clarification.

I do have some experience with leasing issues. I have a number of flats where I own the leasehold. These include one above a commercial premises and two where the ownership arrangements are what is known in north east England as "Tyneside flats" - two flats in a 2 storey building respectively occupying ground and first floor where each flat "owner" has the leasehold of one flat and the freehold of the other. The leases cannot be sold without also transferring the corresponding freehold to the same buyer. I was involved in extending the pair of leases in one case and in changing the freehold and leasing arrangements to that of Tyneside flats for the other. FWIW, my experience with the legal side of leases is that you need a solicitor who is firmly on the ball with such matters.

Walkeia
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Re: Property Leasehold issue

#313320

Postby Walkeia » May 29th, 2020, 11:50 am

Thank you Mike and Modelling man for you responses. What is clear is I need to elaborate and make more clear the situation and this is something I will attempt to do this weekend. It would therefore make sense to put this thread on pause until this point as otherwise it could just lead to more confusion. I'll try revert soon

Thanks again


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