Retain permission to develop when granting a long lease?

by Readers Question

15:00 PM, 12th November 2018
About a month ago

Retain permission to develop when granting a long lease?

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Retain permission to develop when granting a long lease?

I jointly own with one other individual the freehold of a property via a ltd company. The property comprises of three flats on long leases ( 999 years) and a separate integral self contained garage and separate Garden that is not directly accessible from any flat.

The garage and Garden are not on separate leases, but belong to the freehold. An issue arises if either of us wishes to sell our flats as a share of freehold, as a sale of share of freehold would automatically transfer the interest in the Garage and Garden with it which has issues for us, both in terms of being able to find buyers prepared to pay the extra premium for a part share of these areas ( it is in a good area of London) and also if we wish to hold the garage/garden longer term with an eye to development potential.

The solution as we see it is to grant separate grant long leases on the Garage and on the Garden to us, the current freeholders, allowing the individual flats to be sold as share of freehold. A secondary question arises given the potential of the Garage / Garden for development value – when granting leases to the garage / garden, is there any way within the leases we grant ourselves to guarantee the rights of the leaseholders to be able to develop the Garden/ Garage without being blocked by the new freeholder or needing to pay a premium in the case that the flats are sold and new freeholders are introduced?

Are there any other solutions to these conjoined questions, aside from selling the flats as leasehold and retaining the freehold?

Many thanks for any thoughts on the above.

Max



Comments

Ian Narbeth

17:02 PM, 12th November 2018
About a month ago

Hi Max
This is reasonably straightforward if you control the three 99 year leases. You are correct that carving out separate leases of the garden and garage is probably the way to go. You may need to amend the existing 999year leases to ensure development rights.
If any of the leases is mortgaged you need the consent of the lender.

Max

9:31 AM, 13th November 2018
About a month ago

Reply to the comment left by Ian Narbeth at 12/11/2018 - 17:02
Hi Ian

Thanks for the reply - although two freeholders for the three flats, we are only lessees for two of the flats, the third lessee has no freehold interest. Is there a way to ensure development rights without amendment to the original leases as involving the third lessee may prove complicated?

Ian Narbeth

10:06 AM, 13th November 2018
About a month ago

Dear Max
You cannot unilaterally amend the rights granted to the third lessee. It would be necessary to look at that person's lease. You say that the garden is not directly accessible from any flat. Does that mean they don't use it? Even if there is no express right has the third lessee been using the garden? If the3rd lessee has the right to use it he can prevent development.

Max

15:02 PM, 13th November 2018
About a month ago

Dear Ian

As it stands, none of the leaseholders have rights over either the garage or garden. Let me summarize the situation again if I may

Property was originally owned by the council with two flats on private long leases and the third owned by the council with a council tenant in situ. The owners of the two private long leases ( myself and another) bought the freehold of the building from the council and granted a leaseback to the council held flat and new long leases to our own flats – resulting in three leases on the three flats owned by two freeholders. Neither the garage nor garden are mentioned in any lease, nor do they have their own leases, they simply came with the building as part of the freehold, and so are owned equally by the two freeholders.

Hence the original question / dilemma – As it stands, when either of us sells our flat with a share of freehold, then a share of the garage and garden automatically come with that. Asides from the issues of finding a buyer who wants that share, and is prepared to pay a premium for it, we would prefer to hold the garage and Garden with future development potential in mind.

To facilitate that, the idea is to split the garden and garage off onto their own separate leases which would be granted to the current two freeholders, which allows us to sell our flats as share of freehold whilst retaining the leases to garage and garden. I assume that this is the best / only approach?

As a secondary question, is there any way during the process of creating these separate leases for the garage and garden that the right to develop can be enshrined in these newly granted leases for the garage and Garden, without needing to change the original three flat leases. The end situation would be ( Flat 1 original lease / Flat 2 original lease / Flat 3 original lease / Garage new lease with right to develop enshrined / Garden new lease with right to develop enshrined .

Many thanks

max

Max

15:04 PM, 13th November 2018
About a month ago

just to say, no- one enjoys any use of the garden, either formally granted or otherwise

Ian Narbeth

16:26 PM, 13th November 2018
About a month ago

Is there any reason you don't split the freehold? You cannot sell to yourselves but you could set up a company to hold the freehold. Alternatively, if you have children and wish to pass it on, now might be a good time to do som tax planning and transfer the garden before it goes up in value when you get consent to develop it.

Max

13:52 PM, 14th November 2018
About a month ago

Dear Ian

First, many thanks for your engagement in this.

As frequently is the case the situation is slightly more nuanced than is alluded to in the original question. The Garden is quite small and has little development value per se, the main development value would lie in converting the garage ( it is integral to the building) into a studio apartment or small office, opening into the garden and maybe slightly extending the build into the garden. It is a bit of hope value at the moment, as it would need a change in legislation to meet space standards etc but given the continued squeeze on space and growing PD rights, it is not an impossible future scenario. So, the aim is to hive off the garage and garden from being part of the freehold (hence allowing apartments to be sold whilst maintaining control of the Garage and Garden) and holding in case things change in the future. As regards splitting the freehold, it is not something we had considered, the garage is integral to the main building (would this present challenges to creating a freehold vs leasehold, as services and neighbours are in the original building), plus 2 of the leaseholders (who are also the freeholders) have access to the garden for bin storage in a designated area. Given the complications, we had considered leases rather than freehold.

Would be interested in your views

Many thanks

max

Ian Narbeth

14:24 PM, 14th November 2018
About a month ago

Hi Max
I suggested splitting the freehold as the garden is separate. If the garden and garage will be developed together then I would keep tenure the same, i.e. leasehold. You could carve out one lease of the garage and garden to your Newco.

Max

14:52 PM, 14th November 2018
About a month ago

Dear Ian

Thank you. Back to the original question – is there a way within the newly granted Garage / garden lease to enshrine within the new lease the right to future development to the leaseholder of the garage / garden regardless of who the future freeholder is and regardless of their own wishes? And is this something you would be interested to help with in a professional fee based capacity?

Many thanks

Max

Ian Narbeth

15:55 PM, 14th November 2018
About a month ago

Hi Max
By all means call me. Google my name and DMH to find me.
Kind regards
Ian

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