My friend is in the process of selling a flat. We will then be going on and buying another flat together. The buyer's solicitor has come up with lots of questions, and asking for info for which she has no idea where to start.

My friend has share of a freehold (with two other flats in the same building). The buyer's solicitor keeps referring to the leasehold, a landlord, wanting her to extend the lease as there is only 79 years left on it, wanting the last 3 years of audited ground rent and service charges and so on. There has never been a management company nor landlord since she has lived there (which she purchased in 1991). Herself and the other freeholders have always paid and managed any maintenance on the property as seen fit.

This is where it gets confusing and questionable...

Whilst looking for the freehold deed, to prove there has never been a landlord - she can't find one! All she has is an old document dated 1986 referring to the leasehold! There is mention of a management company, but they no longer trade

So how can we find out what the truth is - Is it freehold or leasehold or can it be both?

Could someone have gone in and bought the freehold, not kept the paperwork and sold the flat to her as a freehold?

Can this happen without her solicitor saying so at the time of purchase? (the solcitor no longer trades)

Can it be possible it's only been verbally agreed it's a freehold? The only document that can be found is a transfer of freehold paper with all the freeholder signatories on it.

How can we find the deeds to the freehold to prove it's always been freehold since the flat has been in her possession?

Just to make things worse, we've just checked online the Land Registry site, and her property has 3 leaseholds and 1 freehold registered against it.

Also, the buyer's solicitor wants my friend to purchase a document called a "Flat/Maisonette Defective Title Indemnity Policy" for £250!!

What is this, why do they need it, and why should she pay for it? Why can't her buyer pay for it!?

Please help, we'ver incurred almost £2000 and are no where nearer settling.

i'm not 100% sure about your case, butin the past a person or company would have owned the reehold of the building, and charged rent. at a certain point (1990s??) it became a legal right for flat owners to club together and buy the freehold, which they shared. This might have happened in your case. If so, your friend should probably have got a share in the freehold when she bought the flat, and there would be documents (a share certificate I think) to prove it. However in my own case I never received these, didn't know I should have done! It's only because oneof the other flat owners is a lawyer she knew and actually hassled my sollicitor for me, and eventually the paperwork turned up. but I only bought in January, so it was easily traced.

So I know that's not a HUGE help, but might shed some light.

oh and I meant to say - if you have a share in the freehold, it is still leasehold as well - sounds weird but true. she would be leasing the flat from the management company, of which she is also a shareholder... (if she has the share of the freehold)

What does your friends solicitor say about the situation? Surely he or she should be able to shed some light on this. Has your friend asked the other flat owners- they may have some additional info?

This is something of a minefield which I think only someone with a legal background can sort out. However, just a point to clarify: flats, generally speaking, will always have a lease of some length or another. It is just a set of rules under which all of the flat owners live together. Normally, when flat owners buy the freehold they set up a limited company which actually owns the freehold and all have an equal share in that company. So you never literally own the freehold to your own flat. You own an equal share in a company that owns the freehold to all of the flats and all still have to comply with the terms of the lease. You can then all agree to extend the lease and/or change its terms and conditions.

It would be good if you could get this sorted out for sure, but if not and the 'solution' is to pay £250 for an indemnity insurance, I would say it's a cheap solution (in terms of the overall cost of the transaction). Indemnities seem to be handed out regularly for various things like lack of building regs. It is to insure the buyer against costs of potential future problems.

Of course the buyer shouldn't pay for it - it's not his/her fault that this situation has arisen and the paperwork can't be found.

Thanks everyone for the info. Since posting the inital blog - we've found out exactly what the fuss is all about. Yes, it all now seems straight forward, it's just no-one explained it (we have a pretty bad solicitor, we ended up googling everything). The lease is correct, and there is a TR form that was signed by everyone when my friend purchased the flat in 1991. My friend has recommended that the buyer renew lease with fellow freeholders (if she (ever) moves in) - which will cost her circa £100.


Also, we found this from another solicitors site that had documentation on almost everything:

"Flat/Maisonette Indemnity Policy - Many flats and maisonettes have leases that are not readily acceptable to Lenders as security for loans. SomeLenders will lend on the security of such a lease in some circumstances if an
indemnity policy is taken out. It is solely for the protection of the Lender but the borrower has to pay the single premium."

http://www.batchelors.co.uk/pdfs/homebuyermarch03.PDF

We suspect, the buyers lawyer is passing off costs to us. so no, we won't pay - since she has recently paid out £1200 on painting the flat after the offer was accepted.

Thanks again for all the post.

£100 to renew the lease????
I would have thought at least £500 for your legal fees. Can anybody who's extended their lease after buying a flat clarify on that? I'd really like to know.

quote:

We suspect, the buyers lawyer is passing off costs to us. so no, we won't pay - since she has recently paid out £1200 on painting the flat after the offer was accepted.

Thanks again for all the post.

The fact the she went and paid all that money for a lick of paint isn't really the fault of the buyer though is it? Why would she paint it now she is leaving?

When I bought my flat, I shared the Indemnity Insurance costs 50 / 50 with the Vendor. We have a missing Freeholder. £250 between two of us was not so bad a price to pay. I recommend that you offer to split the cost aswell.

If you do not have Indemnity Insurance, then you cannot sell your flat. This will apply to all people that you attempt to sell it to. Therefore, I think it is sensible and reasonable to swallow the cost of Indemnity Insurance. It is also reasonable to ask that the Buyer pay half, as the insurance will be to cover them against any losses caused by the defective lease (lack of paperwork for freehold share) after all.

Ary.

As someone who has had hassle with leasehold/freehold problems in past (freehold owned by a company which had failed to file accounts and hence ben delisted at company's house)I would make the following general point - make sure that the freeholder's responsibilities are being taken care of by someoneor you could end up with big problems. For example, in a block, buildings insurance is often (usualy?)the freeholders responsibility. If this is the case and you don't have an effective freeholder you could be uninsured. Incidentally, in our case the de-listing of the freehold company didn't stop the developer and original owner of the freehold company collecting service charges for non-existing insurance cover etc!

As your friend has always managed and paid charges as as when, there will be no delegeted "Freeholder". This is perfectly normal in shares of freehold where very few flats are involved.

All you need to do is explain this arrangement to the Solicitor. The answer will be that there is No service or Ground Rent charge, as the everyday running costs are shared, and the ground is owned by the Leaseholders. This ought to be enough.

As there is no overall person in charge of the Freehold, then your friend should have either organised their own buildings insurance, or agreed to share the cost of a single insurance, which would be chargeable annually.

If she doesn't have insurance in place, then more fool her (or him), but it's no biggie to throw in a call to the Halifax (one of the few companies to insure flats for buildings) and organise something. My 1 bed ground floor flat has building insurance for the entire 2 story building for around £10 per month.

Ary.

I am glad to hear it seems to be working out now

ps. not a good idea to post your e-mail address; especially a work one. Will ask the Mods to bop it for you, to protect you against spammers.

Ary.