Leasehold vs. Freehold

ZoZoZo

Hi,

I have gone Sale Agreed on a property which is Leasehold and I'm trying to understand the implications of Leasehold (vs Freehold). From trawling the previous threads the general consensus seems to be that as long as the lease has > 70 years to run then it is 'marketable' and in practical terms no different than freehold. If this is the case then I'm trying to understand what is the purpose of the lease in the first place?

1. To generate income for the landlord. But if this was the case wouldn't the landlord have included rent-reviews or inflation-tracking increases in the rent to prevent it becoming meaningless over time ?
2. To control what could be done with the leased land via covenants in the lease. But if this is the case then why shouldn't these covenants still be of concern to a current buyer ?

So, what's the deal, are rent increases or reviews prohibited by legislation or are they just not typical ?

What about covenants, might these pose a problem particularly if you want to extend or do improvements to the property ?

Finally, I presume that all the details of the lease should be available to my solicitor in the documents he reviews from the Property Registration Authority ? I mean he should be able to tell me what the ground rent is, whether or not it can be increased and who the landlord is ?

Thanks,

Zozo

4ensic15

I thought you were buying a new property?

satguy

I once bought an apartment that was leasehold, it was a 1000 year lease.

To be honest, I never really understood how it worked. I did ask questions at the time and never really got a good answer.

ZoZoZo

4ensic15 wrote: »

I thought you were buying a new property?

Yes, but it's one of three built on the site of a house that was demolished. So apparently the lease that applied to the land still applies to the 3 sub-divided plots. It was a bit of a surprise to me but the solicitor doesn't seem to think it is that unusual.

4ensic15

ZoZoZo wrote: »

Yes, but it's one of three built on the site of a house that was demolished. So apparently the lease that applied to the land still applies to the 3 sub-divided plots. It was a bit of a surprise to me but the solicitor doesn't seem to think it is that unusual.

I didn't think it was allowed under the Landlord and Tenant (Ground Rents) Act, 1978?

" 2.—(1) Subject to subsection (2), a lease of land made after the passing of this Act shall be void if the lessee would, apart from this section, have the right under section 3 of the Act of 1967 to enlarge his interest into a fee simple and the permanent buildings are constructed for use wholly or principally as a dwelling.

(2) Subsection (1) shall not apply where the lease is a reversionary lease under the Act of 1958.

(3) The construction of permanent buildings for use wholly or principally as a dwelling on land which is held under a lease made after the passing of this Act shall render the lease void if the existence of the buildings, as so constructed, immediately before the making of the lease would have rendered the lease void under subsection (1)."

ZoZoZo

4ensic15 wrote: »

I didn't think it was allowed under the Landlord and Tenant (Ground Rents) Act, 1978?

"

Yes, I was wondering about that myslef but I have no previous legal experience so I don't know the specifics. Maybe there's no 'new' lease of land being made, the 3 sub-divided plots are just subject to the terms of the existing (pre '78) lease that covered any tenant on the land ?

Or do you think that any post-78 new build should effectively be automatically freehold ?

4ensic15

ZoZoZo wrote: »

Yes, I was wondering about that myslef but I have no previous legal experience so I don't know the specifics. Maybe there's no 'new' lease of land being made, the 3 sub-divided plots are just subject to the terms of the existing (pre '78) lease that covered any tenant on the land ?

Or do you think that any post-78 new build should effectively be automatically freehold ?

It is a very technical area.

antoinolachtnai

4ensic15 wrote: »

It is a very technical area.

These leases come from an era when the economy, and in particular inflation, worked very differently from how they work in the last 50 years. The economy today is just much more dynamic. They didn’t have things like rent reviews to the same extent at all.

4ensic15

antoinolachtnai wrote: »

These leases come from an era when the economy, and in particular inflation, worked very differently from how they work in the last 50 years. The economy today is just much more dynamic. They didn’t have things like rent reviews to the same extent at all.

I don't know what that has to do with ground rent law being a technical area.
The economy and inflation work in exactly the same way as they do know. It is just that inflation was not a feature of the economy for a very long time asnd so was not anticipated when the leases were granted. Some families owned whole streets of leaseholds and they were valuable source of income in their day. Having covenants in the leases also kept standards up and enhanced the value of unbuilt on land in the area.

antoinolachtnai

They were also a vehicle for landowners to invest in land development.

I agree that it doesn't make any technical difference to the law (though in practical terms the changing economic context made a huge difference) but it sets the 'context'.

Dolbhad

Some land can be leasehold. Usually it was freehold title land sold on as leasehold to stick in conditions that attach to property including rent. As long as lease has more than 70 years to run your fine. Most of the time the rent won’t have been paid as if it’s an old lease, the owner of the rent is unknown. Worse case all that can be sued for is last 7 years rent and seller will give Dec declaration on closing that rent hasn’t been demanded.

Your solicitor will need to get a copy of the lease as it is the start of your legal title. They will read through to make sure there is no unusual restrictions ie can’t build an extension etc but shouldn’t be anything to worry about.

You can always buy out the freehold either by agreement if you can find the owner of the freehold or if not or they don’t agree, can make an application to county registrar to buy our freehold but will costa a few grand on legal fees.

4ensic15

Dolbhad wrote: »

Some land can be leasehold. Usually it was freehold title land sold on as leasehold to stick in conditions that attach to property including rent. As long as lease has more than 70 years to run your fine. Most of the time the rent won’t have been paid as if it’s an old lease, the owner of the rent is unknown. Worse case all that can be sued for is last 7 years rent and seller will give Dec declaration on closing that rent hasn’t been demanded.

Your solicitor will need to get a copy of the lease as it is the start of your legal title. They will read through to make sure there is no unusual restrictions ie can’t build an extension etc but shouldn’t be anything to worry about.

You can always buy out the freehold either by agreement if you can find the owner of the freehold or if not or they don’t agree, can make an application to county registrar to buy our freehold but will costa a few grand on legal fees.

You can't always buy out the freehold. A new building can't be leasehold if you can buy out the freehold.

Dolbhad

4ensic15 wrote: »

You can't always buy out the freehold. A new building can't be leasehold if you can buy out the freehold.

If it’s an apartment you can’t buy out freehold. But you can with a new build (or any building) once you meet the criteria or unless the builder puts a clause in saying you can’t buy out the freehold which would be very onerous it any situation outside of an apartment.

PRAI has loads of information the ground rents and the relevant legislation.

4ensic15

Dolbhad wrote: »

If it’s an apartment you can’t buy out freehold.

You can if there are less than 4 in the block.

Dolbhad wrote: »

But you can with a new build (or any building) once you meet the criteria or unless the builder puts a clause in saying you can’t buy out the freehold which would be very onerous it any situation outside of an apartment.

A builder can't just decide whether or not you can buy out the freehold.
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Dolbhad wrote: »

PRAI has loads of information the ground rents and the relevant legislation.

So have books on ground rent law. A small amount of knowledge is a dangerous thing.

ZoZoZo

4ensic15 wrote: »

You can't always buy out the freehold. A new building can't be leasehold if you can buy out the freehold.

The house I'm Sale Agreed on is a new build and is being sold as leasehold. So does the above imply that for some reason it is not possible to buy out the freehold for this particular property ?

What could cause this ?

From www.prai.ie/ground-rents/ I see:
' The Landlord and Tenant (Ground Rents) Act, 1978 , prohibited the creation of leases of private residential houses after the 16th May, 1978.'
and
' 2.2 A lease of land made after the passing of The Landlord And Tenant (Ground Rents) Act, 1978 is void if the lessee would have the right to enlarge his interest into a fee simple and the permanent buildings are constructed for use wholly or principally as a dwelling. A person who has given consideration for such a void lease has the right to acquire the fee simple in the land and any intermediate interests therein at the expense, as to both purchase money and costs, of the person who purported to grant the lease.'

So, both of these also suggest that either

(i) This property should not be being sold as leasehold in the first place Or
(ii) There is something specific about this leasehold that means it is not possible to buy the freehold.

Anyone got any ideas what might be going on here ? As far as I was concerned this was a bog-standard purchase; a developer bought a house in the suburbs in Dublin with a large garden, demolished the original house and replaced it with 3 new-builds. Is this not essentially the same situation as basically any new development, albeit smaller in scale ?

4ensic15

ZoZoZo wrote: »

The house I'm Sale Agreed on is a new build and is being sold as leasehold. So does the above imply that for some reason it is not possible to buy out the freehold for this particular property ?

What could cause this ?

From www.prai.ie/ground-rents/ I see:
' The Landlord and Tenant (Ground Rents) Act, 1978 , prohibited the creation of leases of private residential houses after the 16th May, 1978.'
and
' 2.2 A lease of land made after the passing of The Landlord And Tenant (Ground Rents) Act, 1978 is void if the lessee would have the right to enlarge his interest into a fee simple and the permanent buildings are constructed for use wholly or principally as a dwelling. A person who has given consideration for such a void lease has the right to acquire the fee simple in the land and any intermediate interests therein at the expense, as to both purchase money and costs, of the person who purported to grant the lease.'

So, both of these also suggest that either

(i) This property should not be being sold as leasehold in the first place Or
(ii) There is something specific about this leasehold that means it is not possible to buy the freehold.

Anyone got any ideas what might be going on here ? As far as I was concerned this was a bog-standard purchase; a developer bought a house in the suburbs in Dublin with a large garden, demolished the original house and replaced it with 3 new-builds. Is this not essentially the same situation as basically any new development, albeit smaller in scale ?

A builder is required to buy out the freehold and offer it as such.