Lease Burden

jiminho

I'm unsure where exactly to post this so mods, please move if required.

I am wanting to purchase some land to build a house. I've purchased the folio and there are lease burdens on it. They're from approximately 80 years ago and have a term of 500 years. Is this a significant encumbrance to purchasing and building a house? What are my next steps and who should I contact?

Peregrinus

jiminho wrote: »

I'm unsure where exactly to post this so mods, please move if required.

I am wanting to purchase some land to build a house. I've purchased the folio and there are lease burdens on it. They're from approximately 80 years ago and have a term of 500 years. Is this a significant encumbrance to purchasing and building a house? What are my next steps and who should I contact?

A solicitor.

He will explain to you that the leasehold interests is the valuable interest here, and that's what you want to buy.

jiminho

Peregrinus wrote: »

A solicitor.

He will explain to you that the leasehold interests is the valuable interest here, and that's what you want to buy.

Ok

So it’s not the owner of the land I should be concerned with, it’s the leasee? And when you say buy do you mean buy out their lease?

ezra_pound

jiminho wrote: »

Ok

So it’s not the owner of the land I should be concerned with, it’s the leasee? And when you say buy do you mean buy out their lease?

... Or you could wait out the remaining 420 years...

Peregrinus

Yes, I mean buy out their lease. They have the right to occupy the land for the next 420 years, and if you acquire that right you'll have plenty of time to build and occupy a house. Indeed, any house you build now will have fallen down long before the lease expires.

The owner of the leasehold interest may very well have the right to buy out the freehold interest (though obviously the present owner hasn't exercised that right) so if not owing the freehold bothers you, that's something you could look at. Your solicitor will advise you about this.

But your question suggests that you are looking at buying land which isn't currently being offered for sale. I wouldn't devote too much time to worrying about the freehold reversion until I had an answer to the more basic question; is the current owner willing to sell? Approach the current owner (of the leasehold interest) and, if he seems open to offers, then go to a solicitor.

jiminho

Peregrinus wrote: »

Yes, I mean buy out their lease. They have the right to occupy the land for the next 420 years, and if you acquire that right you'll have plenty of time to build and occupy a house. Indeed, any house you build now will have fallen down long before the lease expires.

The owner of the leasehold interest may very well have the right to buy out the freehold interest (though obviously the present owner hasn't exercised that right) so if not owing the freehold bothers you, that's something you could look at. Your solicitor will advise you about this.

But your question suggests that you are looking at buying land which isn't currently being offered for sale. I wouldn't devote too much time to worrying about the freehold reversion until I had an answer to the more basic question; is the current owner willing to sell? Approach the current owner (of the leasehold interest) and, if he seems open to offers, then go to a solicitor.

Thank you for the advice, appreciated. I will be contacting a solicitor but just want to do my homework before I do so. I think i'll explain my situation in a bit more detail.

There is a vacant plot of land in an existing housing estate. The estate was built decades ago. I purchased the folio for the land in question and it does extend beyond the boundaries i'd be interested in (it includes a section of road in the estate). The folio has three lease burdens listed and from what I can tell on the land registry website map, only two of those leases encompass the land i'm interested in. From the map, the burdens go far beyond the land i'm interested in. The area of one of the leases seems to cover another house (from outside the estate) and the other one seems to include about a dozen houses existing in the estate. The leases were leased out in the 20s and 30s by the previous owner and the developer of the estate at the time is the new owner.

To answer your questions and ask a few more: the land isn't for sale currently, I know the owner of the land (met him once and sort of a family friend) but I do not know the lessees, probably dumb question but are they even still alive and if not, what then?, would the owner be receiving ground rent from the lessees?, if I were to purchase the lease from lessee and build a house on the land would I be paying ground rent annually then?, the rent on one of the leases is 12.50 pounds with a remaining term of 415 years; how does that translate to buying out the lease when it comes to negotiations (inflation etc)?

Peregrinus

When you say you know the "owner of the land", I presume you mean the owner of the freehold interest in the land?

If there is a lease in existence over the area you are interested in, the freehold interest is of negligible value and buying it will not give you the right to build a house on the land, or occupy the land, or even to enter the land; just the right to receive the ground rent.

What you need to do is buy the leasehold interest; the one that entitles you to occupation and use of the land for the next 415 years.

From what you say part of the area you are interested in may be subject to one lease, and the rest to another lease. If that's so you'll need to buy from both of the relevant leaseholders.

Once you have bought that, you will probably have a right to buy the freehold interest for an amount equal to eight or ten times the annual ground rent. But that's a detail; at this point I suggest you should just forget about the freehold interest and look into buying the leasehold interest from whoever has it.

If the leases extend to more than just the plot you are interested in, you may find that the leaseholders aren't interested in giving you just the plot you want; one or both of them may want you to take on the entire leasehold interest.

Do not worry about the fact that the boundary of the plot extends to the mid-point of the road in front of it; this is perfectly normal. That strip of land has been dedicated as a public highway and is in charge of the local authority. If you buy the land you will technically own that strip, but you won't be able to prevent the public from using that strip as a highway (because it has been dedicated) and you won't be responsible for maintaining it (because it's in the charge of the council). You'll find that the owners of all the other properties in the estate similarly own the strip of land between their boundary walls/fences and the mid-point of the road.

jiminho

Peregrinus wrote: »

When you say you know the "owner of the land", I presume you mean the owner of the freehold interest in the land?

If there is a lease in existence over the area you are interested in, the freehold interest is of negligible value and buying it will not give you the right to build a house on the land, or occupy the land, or even to enter the land; just the right to receive the ground rent.

What you need to do is buy the leasehold interest; the one that entitles you to occupation and use of the land for the next 415 years.

From what you say part of the area you are interested in may be subject to one lease, and the rest to another lease. If that's so you'll need to buy from both of the relevant leaseholders.

Once you have bought that, you will probably have a right to buy the freehold interest for an amount equal to eight or ten times the annual ground rent. But that's a detail; at this point I suggest you should just forget about the freehold interest and look into buying the leasehold interest from whoever has it.

If the leases extend to more than just the plot you are interested in, you may find that the leaseholders aren't interested in giving you just the plot you want; one or both of them may want you to take on the entire leasehold interest.

Do not worry about the fact that the boundary of the plot extends to the mid-point of the road in front of it; this is perfectly normal. That strip of land has been dedicated as a public highway and is in charge of the local authority. If you buy the land you will technically own that strip, but you won't be able to prevent the public from using that strip as a highway (because it has been dedicated) and you won't be responsible for maintaining it (because it's in the charge of the council). You'll find that the owners of all the other properties in the estate similarly own the strip of land between their boundary walls/fences and the mid-point of the road.

Correct.

Understood. I suppose I’d have to talk to an estate agent to evaluate the cost of the leasehold. I’m guessing it has nothing to do with the cost of the rent?

So if they do demand that I buyout the whole leases area, again the leases area would encroach on other houses, could I technically build in someone’s back garden then pending PM of course?

Peregrinus

jiminho wrote: »

Correct.

Understood. I suppose I’d have to talk to an estate agent to evaluate the cost of the leasehold. I’m guessing it has nothing to do with the cost of the rent?

A lease with more than 400 years to run and a negligible ground rent will be worth pretty much the same as an unencumbered freehold interest in the same land.

jiminho wrote: »

So if they do demand that I buyout the whole leases area, again the leases area would encroach on other houses, could I technically build in someone’s back garden then pending PM of course?

No.

It's highly unlikely that other people are squatting, and building on land in which they have no interest. Almost certainly the information you have got in your land registry search is incomplete. They have interests in the land which are not appearing on the folio that you have obtained a copy of.

jiminho

Peregrinus wrote: »

A lease with more than 400 years to run and a negligible ground rent will be worth pretty much the same as an unencumbered freehold interest in the same land.


No.

It's highly unlikely that other people are squatting, and building on land in which they have no interest. Almost certainly the information you have got in your land registry search is incomplete. They have interests in the land which are not appearing on the folio that you have obtained a copy of.

Well thank for the responses, very much appreciated. I guess next step is to contact a solicitor/estate agent to evaluate the land and then try and contact the leeses to buyout the remainder of their respective leases. I’m guessing since the leeses named would be over 100 yrs old at this point that either a new company or relative now leeses the land and maybe they don’t even know about it. Anyway I got some digging to do