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Creating a new leasehold on freehold property

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  • Creating a new leasehold on freehold property

    Hi all
    Looking for some advice please.
    I am the freeholder of a detatched house, split into 2 flats, and surrounding land. I occupy the ground floor flat and there are leashold occupants in the upper flat (82 years left). I have a garden directly accessible from my flat, the upper flat has a remotely located garden about 65 feet from the back wall of house - no direct access fromt the house.

    The upper flat is about to go on the market for sale. A neighbour has approached both myself and lessees with a proposal to buy their garden land and convert to off street parking for his house. I am not averse to the proposition but far from a definitive decision. The estate agents have valued the upper flat with and without the garden. The valuation of the land by estate agent is 12% of sale price inclusive of garden.

    I am trying to get a sense of costs for the 3rd party neighbour (excluding rennovation costs)

    If I agree to the proposal the upper flat would expect a payment from the 3rd party neighbour in line with the estate agency valuation of garden.

    If I agree to the proposal I am only prepared to proceed with a leasehold of the land (retaining the freehold) to the 3rd party neighbour;
    • is this ok from a legal pov?
    • Is there a payment due to me as the freeholder to create a new lease in addition to the payment to current lessees for garden?
    • Of course there would be solictor fees to create lease, annual ground rent, planning permission fees, anything else obvious I am missing?
    • Should I engage a surveryor for an independant valuation of the upper flat garden?
    Thanks in advance for any perspective you can share.

  • #2
    Re: Creating a new leasehold on freehold property

    You don't have to create a new lease - simply allow an assignment of part of the land in the lease. (It is very likely that there is clause preventing the transfer of part only of the area comprised in the lease, but as landlord you can expressly waive that requirement.) You would have to provide for apportioning any ground rent between the flat and the garden and consent to the change in the way the garden was used.

    That's the easiest method - but it is slightly messy in that the buyer of the garden in theory still has irrelevant obligations like maintaining/decorating the interior of the flat! However even that could be dealt with if, for instance you joined in the transfer of the garden area to agree that the covenants about the flat would not be binding on the garden owner and any specifically about the garden (e.g. maintaining boundary fences) not on the flat owner.

    Alternatively the flat owner surrenders his lease insofar as it relates ot he garden and you grant a separate lease of the garden which he then transfer sot his buyer.

    There will be some paperwork and solicitor involvement however it is done. I'm afraid.
    RICHARD WEBSTERwww.rwco.co.uk
    As a conveyancing solicitor I want to be helpful (England/Wales only) but can't accept liability for this.


    • #3
      Re: Creating a new leasehold on freehold property

      I would suggest selling the freehold of the garden, rather than just agreeing that the owner of the flat can assign part of their lease. I am sure that the buyer would expect that, otherwise he would only get a leasehold title with 82 years left.

      It would also be necessary for the owner of the other flat to surrender the lease as it relates to the garden, so that the buyer gets a clear title free from the lease of the flat.

      If you have a mortgage then it will be necessary for your lender to agree, but that should not be a problem since the garden is already subject to the lease, so selling it wouldn’t affect their security. If the owners of the flat have a mortgage then the various transactions will probably all have to be arranged at the same time as the completion of their sale, when the mortgage will be paid off.

      If you do this then you can certainly ask the neighbour to pay something to you as well as to the owners of the flat – it is difficult to say whether it is worth getting a valuation, perhaps it would be better to see how much the neighbour is prepared to pay. After all, you would be getting something which you wouldn’t otherwise have expected, so even a small sum would be better than nothing.

      As to legal costs, you should get quotes from Solicitors who do Conveyancing. You will need to make it clear that this is not just a bog-standard property sale – and get two or three quotes. I assume that the neighbour is willing to pay your legal costs.

      If you sell the freehold then you won’t have to worry about planning, that will be the neighbour’s problem.

      You can ask for covenants to be put in the transfer deed making the buyer responsible for maintain any boundary fence with your garden. It would also be worth asking for a restriction to be put on the land that it is not to be used except for parking; if someone got planning permission for a different use in the future (building a house?) you or future owners of your house could then demand money to release the restriction.

      (This reply is given on the assumption that the property is in England or Wales, and the author accepts no liability.)


      • #4
        Re: Creating a new leasehold on freehold property

        Sensible comments from Fridaysmove. Don't disagree.
        RICHARD WEBSTERwww.rwco.co.uk
        As a conveyancing solicitor I want to be helpful (England/Wales only) but can't accept liability for this.


        • #5
          Re: Creating a new leasehold on freehold property

          Thank you both for your observations, clearly it is more complex than I originally thought and I have some decision making to do!