What is a flying freehold?

There are two main types of land ownership: freehold and leasehold. Freehold ownership is where the person owns outright all of the land and buildings on a plot. For example, houses are usually freehold properties. On the other hand you have leasehold property. This is where a property is owned for a set period of time, and rent is paid to a landlord (often the freehold owner).

There is also a concept known as a ‘flying freehold’. This is when a section of a freehold property extends above or below a neighbouring or adjoining property. For example, where a room or balcony is situated above a shared passageway or protrudes over an adjoining property or section of land. Flying freeholds are most common where an older, large building has been converted into a number of smaller freehold properties.

It is not always obvious whether a property is subject to a flying freehold. It is therefore paramount that any potential purchaser carefully inspects the property and looks out for any sections that appear unusual or to extend outside the boundaries. Where any doubts arise, a purchaser should immediately refer to their surveyor and solicitor. A surveyor will then physically inspect the property and assess the section of the building which has raised concern. The solicitor can then advise on the title deeds.

What does this mean?

Where a flying freehold exists, the owner will need specific rights to benefit the property. For example, rights of support from the property below and the right of shelter from the property above. The owner will also require rights of access to enter onto the neighbouring property for maintenance and repair as required.

The prospective owner of a flying freehold will also want to check whether there is an obligation on the neighbouring property to maintain and repair that property. This is important as the flying freehold section relies on the good structural condition of the lower property. You would want to ensure that, if works need to be carried out, you have a way of forcing an unwilling neighbouring owner to contribute and assist.

Both properties should also be under an obligation to each other to maintain and insure their part of the property to ensure the consistency.

What do I do if my flying freehold property does not contain required legal rights?

Unfortunately, there may be a case where you have found your forever home which is subject to a flying freehold and the legal title does not assist you with the rights and covenants you require. Here, an indemnity policy may be a solution.

Indemnity insurance will cover you if a part of the property lies under or over an adjoining occupied property. The policy will cover the inability to force your neighbour to repair for the support and protection of your property. This includes where the adjoining premises are uninsured or inadequately insured.

Alternatively, you could enter into a mutually agreed Deed of Grant and Covenant to vary the title deeds. With this, you could ensure the correct rights and covenants are granted and noted on the title. This can be a lengthy and expensive process. You and your neighbour will both need to agree on the rights and covenants before they can be added and registered on the title deeds for both properties.

Lenders’ views

Where you are purchasing the property with the aid of mortgage, your solicitor must report to your lender if any part of the property is subject to a flying freehold. Lenders have differing views on lending on properties with flying freeholds.

Some will lend if you ensure that an adequate indemnity policy is in place. Others, on the other hand, may reconsider their valuation or offer and whether they can lend in such circumstances. Therefore, potential purchasers should seek advice on the risks concerning future saleability and the possibility of any decrease in value.

If you have concerns regarding the future marketability of the property, your surveyor should be able to advise.

Levi Solicitors LLP’s expert conveyancing team can advise on all types of residential property. If you are purchasing a property or think you have an issue relating to a flying freehold, call us on 0800 988 7756.


Ground rent increases and unexpected Assured Shorthold Tenancies

Many freeholders are selling leasehold properties which are subject to unreasonable ground rent provisions. Landlords can only increase the ground rent if the lease contains a provision allowing them to do so. In some cases, such provision can create an unreasonable or excessive annual rent amount. What this sometimes means, is that suddenly your long lease is an Assured Shorthold Tenancy. So what does this mean?

What is an unreasonable ground rent increase?

Where the ground rent is £250 or more a year, buyers and lenders may class it as unfair and unreasonable. So why is this?

Leases with rent over £250 a year are automatically Assured Shorthold Tenancies. The level is higher in London, at £1,000 per year. There are some exceptions, including where the tenant does not live in the property as his main home, or if the tenant is a company.

How does this cause an issue?

This really only causes an issue if the resident tenant fails to pay his ground rent.

If the rent is below £250 a year and the tenant stops paying rent, a landlord would be able to recover possession of the property by forfeiting the lease. This is a complex legal procedure, and the lender will be named in the possession proceedings. The lender and the tenant will have the right to apply for relief from forfeiture if the court forfeits the lease.

Where the rent is over £250 a year, and therefore an assured shorthold tenancy, the landlord has another route to possession. If the tenant breaches the tenancy (including rent arrears), he can serve the tenant with a section 8 notice. If there are over three months’ arrears when the landlord serves the notice, issues proceedings and then gets to the court hearing, the court has no choice but to make an order for possession. This is all without the landlord having to inform the lender. At this point, the tenant can be evicted, losing their home, and the lender loses its security over the property.

I am buying a property with a ground rent increase provision, what should I do?

Your solicitor will report to you and your mortgage lender about a rent increase clause. This will ensure that you and your lender are aware of the risks and consequences should you fall into ground rent arrears during the term of the lease.

One option is to ask the landlord to cap the ground rent at £250. If agreed, this will be done by way of deed of variation.

It is important to be aware that if the landlord agrees to a deed of variation, it is highly likely that you will need to cover all the legal fees for this for both you and the landlord. Unfortunately, this process will contain additional work to the standard transaction and may delay the completion of your purchase.

If the landlord insists on keeping the ground rent provision as per the lease, the lender may require an indemnity policy. Depending on the terms of the policy obtained, an indemnity policy might include:

  • The cost of defending or prosecuting any legal proceedings
  • damages, compensation and costs awarded against you as a buyer by a court or tribunal and
  • the expense of complying with any injunction

Your solicitor will advise you on the specific terms of any indemnity policy.

Summary

If you have found the perfect leasehold home, where the rent is (or could become) over £250 a year, you should not experience issues during the term of the lease. However, it is difficult to know whether you might encounter difficulty selling such a property in the future, and whether it might negatively affect the valuation. It is important to note that some lenders will not lend on such properties. Likewise, some buyers are not happy to pay such high rent amounts nor take that risk.

If you are considering purchasing a leasehold property with a rent increase provision, your solicitor will advise you on the best way to protect your position.

Our residential property team are on hand to answer your queries about your ground rent. Alternatively, if your landord has started possession proceedings, please contact our property disputes team. Call us today on 0800 988 7756.


Stamp Duty Land Tax on residential property transactions

When purchasing property in the UK, there are different ways that Stamp Duty Land Tax (‘SDLT’) is calculated. We explain the different types of scenario below.

First-time buyers

Those who have not owned property before are entitled to apply for first-time buyer relief. This means that they will not pay SDLT on properties worth less than £300,000. This is provided that all buyers fulfil the following qualifying criteria:

  1. All purchasers have not owned property before (regardless of the location);
  2. All purchasers have completed their declarations and provided them to their conveyancer; and
  3. The purchasers will occupy the property and treat it as their main residence and not as a buy to let or for any other purpose.

First-time buyers purchasing a property for over £300,000, but under £500,000 will pay SDLT at 5% for the amount above £300,000. Unfortunately, first-time buyers purchasing a property for £500,000 or above will lose their entitlement completely and HMRC will treat them as if they previously owned property.

Please note that if you inherited property prior to your first purchase, you may not have a right to claim the relief and will no not be classed as a first-time buyer.

Moving house

Those who have owned a property previously will not be entitled to claim any form of relief. Therefore, you will need to pay the appropriate percentage based on the purchase price. This will impact on the amount you are required to pay. The government website has a SDLT calculator that can work this out for you.

Second property owners

Those who, on completion, will own more than one property (anywhere in the world) will be expected to pay additional 3% above the usual payable SDLT amount.

However, if you sell your previous main residence within 36 months of the date your purchase completes, you may be entitled to claim back the extra stamp duty from HMRC. This is provided that your new property is classed and treated as your main residence.

How to pay your Stamp Duty Land Tax

Ordinarily, your conveyancing solicitor will prepare the land transaction form and submit it following the completion. Where payment is required, they will be expected to pay the required amount to HMRC within 14 days. If the payment is not made within 14 days, there will be a £100 penalty and possibly interest to pay.

Please note that your solicitor will require you to sign a declaration confirming your position regarding the stamp duty. If there are any changes during your transaction, you must inform your solicitor as this may impact on the amount you are required to pay.

Levi Solicitors LLP’s residential conveyancers are experts in their field. Call us today on 0800 988 7756 for a quotation for your purchase and / or sale.


Entering a Contract Race when buying a property

Property is a scarce and expensive commodity. When there are many buyers after the same property, a seller can enter a contract race by accepting more than one offer.  This is to filter out the best buyer.

Contract Race – how it works

A Contract Race occurs when a seller accepts more than one purchase offer. The vendor’s solicitor issues contract packs to all the potential buyer’s solicitors. The person who can exchange first ‘wins the race’ for the property.

Timescales

The time it takes to complete a property transaction can vary. A cash buyer is usually faster in the race over a buyer waiting on mortgage approval.

When contracts are exchanged, both parties are legally bound to each other. If either side change their mind at this point – there are expensive penalties.

Duty to Inform

The seller’s solicitor has a duty to tell the buyers when a Contract Race is taking place. However, before the vendor’s solicitor can do this, they must get permission from their client.

Consequences

There is no legally binding contract at this stage, so buyers have the right to change their mind and withdraw from the purchase when they are told about the Contract Race.

A vendor cannot take action against a purchaser withdrawing. This means the acquired costs must be covered themselves.

This can leave the seller back at ‘square one’ – looking for new buyers.

It is always advisable to speak to your solicitor before entering into a ‘contract race’ so that you are aware of the consequences and implications.

The purchasers need to think about costs they may lose if they are unsuccessful in the contract race. For example, surveyor fees, searches and legal costs.

Get in Touch

At Levi Solicitors, our residential property team are accredited by the Conveyancing Quality Scheme. We explain the conveyancing process throughout the various stages and ensure that we complete your purchase or sale in accordance with your timescales. Call us today on 0800 988 7756 for a no obligation quote. Alternatively, email your enquiry to info@levisolicitors.co.uk.

contract race


Evicting tenants - Following the correct procedure and issuing notices

The landlord and tenant relationship like any other, is built on trust. The landlord relies on the tenant to look after and respect their property. In turn, the tenant expects the landlord to stick to the terms of the tenancy. However, landlords sometimes experience problems with their tenants that eventually lead to them having to issue an eviction notice.

Of course this is not ideal for either sides and things can get heated when eviction is mentioned. So what is the most appropriate procedure to follow in such situations?

Communication

It is wise to communicate with the tenant once issues arise. This is to firstly try and resolve them mutually avoiding evictions and legal proceedings. We often advise our clients to write a letter of complaint to their tenant. In many cases, a simple letter is the solution to resolving any issues the landlord experiences. However, if the dispute ends up in court, the Judge will consider all the steps the landlord has taken to try and resolve the matter themselves.

If the tenant does not respond to the letter of complaint the landlord needs to decide which notice will be served on the tenant. The appropriate notice will differ from case to case.

Issuing a notice

Landlords can serve Section 21 or Section 8 Notice on the tenant.

Section 21

Section 21 notices are issued when the landlord wants their property back after the fixed term tenancy ends. Or during the tenancy if there is no fixed end date (often known as periodic tenancy). Landlords are required to give at least two months notice to their tenant.

There are certain restrictions which prohibit landlords serving Section 21 notices. For example, if it is less than 6 months since the tenancy started or where a tenant’s deposit was not placed in a deposit protection scheme.

Other requirements must be fulfilled, and we recommend seeking the advice of a solicitor before issuing a notice.

Section 8

In order to serve a Section 8 notice, the landlord will need to show that the tenant has breached one (or more) of the contractual terms. For example, if there are rent arrears or a tenant has been a nuisance to their neighbours.

The notice period can vary and be as short as two weeks.

I have issued a notice but the tenants are still not leaving

If the tenant does not vacate after the served notice, there are steps a landlord can then take.

If tenants don’t vacate before the end of the notice period, the landlord can apply to the court for a Possession Order. This sets out that the tenant must vacate the property within a given timescale. This is the only legal way of physically evicting tenants who refuse to voluntarily leave.

Should the tenant still refuse to vacate, the landlord can apply for a warrant possession. This means the tenant will receive a notice of an appointment with a bailiff with a date they must be evicted from the property by.  Arrangements with the bailiff can be made to evict the tenant should they fail to leave.

Claiming rent arrears

The main benefit of using Section 8 notice is that the court can also deal with the rent arrears during the proceedings.  But under a Section 21 notice, a landlord will need to issue a small claim should they wish to pursue the arrears which may not always be practical.

Get in touch

Our team of specialist property dispute resolution solicitors can assist and advise at any stage of a dispute, from mediation through to court action and injunctions. For a free consultation call Levi Solicitors on 0800 988 7756 or email info@levisolicitors.co.uk.

 

Evicting your tenant