Freeholder wants £35k for a Variation of a Defective Lease!

by Readers Question

A year ago

Freeholder wants £35k for a Variation of a Defective Lease!

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Freeholder wants £35k for a Variation of a Defective Lease!

The story so far…..Bought a 1st floor maisonette for cash. It had a defective lease hence got it for a good price. Lease has around 900 years to run on it with £3 ground rent. defective

Freeholder owns downstairs flat and appeared to be reasonable in early discussions. I offered to pay for his legal costs and some compensation for his time and inconvenience to have the lease varied. Defects related to restrictive covenants, errors on lease numbering and missing detail on some payments.

His response?

Reduce the lease term to 99yrs, increase the ground rent to £300 per annum and give me £35k for the inconvenience!!!!.

Can he do that?

I would really like some advise as to what my options are since I do wish to mortgage the property at some point.

Many thanks

Prabh

Comments

terry sullivan

A year ago

what is the defect in the lease?

He can always ask, I suppose on the basis that if you don't ask you don't get! But no, he cannot force you into anything. He is chancing his arm, in a style rather similar to at least one firm of aggressive freeholders' solicitors I know of. The tactic is to try get to you to agree to increased ground rent/service charge. This seems to be the significant factor in establishing a 'book value' of a freehold reversion. At present it is not worth that much to him given the low value of the ground rent and length of the lease. By contrast, with £300 per year he could sell the freehold on for more. If your lease is actually defective it would be much cheaper to apply to the county court for rectification of it, although this would involve some expense and would only be appropriate if the lease contained obvious anomalies, mistakes and inconsistencies. The freeholder will know that you will be reluctant to take him to court in an uncertain and potentially expensive battle, but remember that he is afraid of that too! You may find that he will maintain a totally unreasonable position until you are at the door of the court. Earlier this year I was involved in a similar case where the freeholder's representative only compromised literally 30 seconds before the judge was due to walk into the court room to start the case. Time to weigh up your options I would say! Good luck

Kate Mellor

A year ago

Your freeholder sounds like an unscrupulous Arse if you don't mind my saying! It makes an appearance in court look pretty cheap though...

John Morris

A year ago

Reply to the comment left by "Charles King - Barrister-At-Law" at "12/12/2016 - 12:36":

I like your forthrite action to this mans problem but does'nt the solicitor who did the conveyencing for his purchase have a duty to let him know if there were problems in the lease. He may contribute to the court costs.

John Pettman

A year ago

It is not uncommon to find defects in residential Leases. The easiest and most common practise is to take out indemnity insurance. Just ask your lawyer who acted for you in the purchase . The insurance can cover successors in title and mortgagees. The premiums are a one off payment your lawyer can immediately issue the policy assuming it is not a major defect in which case a bespoke policy would be required . The premiums are very small

John Pettman LL.B. (Hons)

You may well be right John, but note "It had a defective lease hence got it for a good price" - sometimes you get what you pay for ?

Kate Mellor

A year ago

Reply to the comment left by "John Pettman" at "12/12/2016 - 17:01":

Great suggestion John.

My understanding is that these are not always available, especially where an issue is already known, however I don't know very much about this area at all (only through solicitors insisting on them to protect lenders in various of our transactions, but we did have an issue which I thought would be coverable by a policy of this type and the solicitor said no).

I certainly would be asking though in this case, as it would be by far the cheapest and easiest option. As you say, the policy prices are very reasonable and don't need to be renewed.

Either a solicitors firm with a conveyancing arm, or an insurance broker would be your best bet.

John Pettman

A year ago

The position with any insurance is that it is a "Contract of utmost good faith " It is for the person taking out the policy to disclose any material matter that may effect the insurance company decision In issuing the policy. Where issues are already known and just for argument lets say a breach of building regulation or a breach of a restrictive covenant it is a requirement that NO contact should be made with the local authority or the person or company that has the benefit of the restrictive covenant. If a scenario is not covered in the handbooks issued by the insurance companies who cover this market which does not happen very often then the lawyer should write to the company outlining the position and a quote for a bespoke policy would be issued . It is normal conveyancing procedure where there is a defect in a title that the seller pays for the cost of a policy, Thus if it is a DEFECT in the actual title I would be surprised if NO insurance would be prepared to cover it. I have found that they are very quick to respond to any enquiry
in my experience if being a LL.B.(Hons) and semi retired former Licensed Conveyancer

John Pettman

Kate Mellor

A year ago

Reply to the comment left by "John Pettman" at "14/12/2016 - 20:04":

Thanks for that explanation John, it's really useful to know...

Puzzler

A year ago

As someone else asked, what is the defect?

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