Importance Score: 35 / 100 🔵
Navigating the complexities of a first home purchase can often reveal unforeseen challenges. A couple, eager to acquire their first property, discovered potential pitfalls while buying a top-floor flat in a two-story maisonette. Their solicitor unearthed serious concerns regarding the leasehold, shared freehold, and a dispute with a co-freeholder, prompting them to question whether to proceed with the property purchase.
Understanding Maisonette Leasehold and Shared Freehold Property Issues
The initial issue highlighted by the solicitor was the property’s maisonette lease. In this arrangement, a hypothetical horizontal boundary delineates responsibilities between the ground floor and first-floor flats.
This lease structure designates the ground floor flat responsible for the upkeep of areas below this imaginary line, while the top-floor flat assumes responsibility for everything above it. Critically, this includes sole responsibility for the roof’s maintenance and potential repairs, which could lead to substantial and unexpected expenses in the future for the prospective homebuyers.
Independent Building Insurance Policies: A Risky Arrangement?
A further complication arises with the building insurance. While both flats jointly own the freehold of the building, their lease mandates separate insurance policies for each flat, instead of a single policy covering the entire structure.
This raises concerns about the repercussions if one freeholder fails to maintain their insurance coverage. In such a scenario, the financial protection to rebuild the entire building following significant damage or loss could be jeopardized, leaving both property owners in a vulnerable position.
vCard.red is a free platform for creating a mobile-friendly digital business cards. You can easily create a vCard and generate a QR code for it, allowing others to scan and save your contact details instantly.
The platform allows you to display contact information, social media links, services, and products all in one shareable link. Optional features include appointment scheduling, WhatsApp-based storefronts, media galleries, and custom design options.
Co-freeholder Dispute and the Stalled Property Transfer
Adding to the challenges, the ground floor freeholder is currently refusing to sign the TR1 transfer document, a legal requirement for property ownership transfer. According to legal counsel, both freeholders’ signatures are essential for the transaction to proceed.
The refusal stems from allegations by the ground floor owner that the top-floor flat breached the lease terms by replacing carpets with solid wood flooring. This dispute has escalated to court proceedings initiated by the seller against the fellow freeholder.
Due to the buyers’ wish to postpone completion until after the resolution of these legal proceedings, the seller and estate agent have resumed marketing the property. They are now attempting to sell only the leasehold, while retaining the freehold, seemingly as a way to circumvent the existing issues and expedite a sale.
Faced with these considerable hurdles, the crucial question remains: Should the buyers proceed with the purchase given the identified problems?
Expert Advice on Navigating Complex Property Purchase Scenarios
Ed Magnus from This is Money notes that complications are common in the home buying process, particularly with flats and their often-complex lease arrangements.
While shared freehold is often perceived as superior to leasehold, it can introduce its own set of challenges. Sharing property title and responsibilities with neighbours can unfortunately heighten the potential for disagreements.
Solicitors routinely advise caution regarding potential future issues. However, a proficient solicitor should also seek to identify and propose viable solutions to these challenges.
The most pressing concern in this situation is undoubtedly the ongoing legal dispute and the co-freeholder’s refusal to sign the TR1 form.
The TR1 document is legally indispensable for transferring complete property ownership. Given the shared freehold arrangement, both freeholders must sign to legally finalize the property transfer.
Beyond the legal ramifications, the buyers must also consider the potential impact of these issues on their enjoyment of the property and its future resale value.
Becoming trapped with an unsellable home is a significant risk to consider.
However, if the dispute can be resolved and the leases modified to allow for a single building insurance policy—rather than two separate ones—purchasing the property could still be viable.
The seller’s revised strategy to sell only the leasehold while retaining the freehold is unlikely to resolve the core problems. They remain legally obligated to disclose the ongoing dispute to any prospective buyer.
For specialized insights, we consulted Chun Wong, Head of Dispute Resolution at Hodge Jones & Allen; Mike Hansom, Consultant for Property Litigation at BLB Solicitors; and Paula Higgins, Chief Executive and Founder of the HomeOwners Alliance.
Roof Liability Concerns: A Significant Red Flag for Homebuyers?
Paula Higgins cautions: The responsibility for roof upkeep and repairs presents a considerable financial exposure.
Depending on the roof type, repairs or replacements can range from £100 to £1395 per square meter.
Buyers proceeding with the purchase should commission a comprehensive building survey to thoroughly assess the roof’s condition.
Separate Building Insurance: A Potential Financial Risk?
Mike Hansom clarifies: If the other flat owner lacks insurance, recovering the full value of your asset in the event of a significant claim may be impossible.
Leasehold Purchase: Is it a Sound Option in This Situation?
Chun Wong advises: Acquiring the leasehold without a share of the freehold is generally unfavorable. In this scenario, the other leaseholder retains a share of the freehold, creating a power imbalance.
If pursuing a leasehold purchase despite these risks, securing comprehensive insurance, including legal expense coverage for potential future disputes, is strongly recommended.
Mike Hansom adds: The seller’s proposition to sell only the leasehold could mean forfeiting the opportunity to ever own a share of the freehold.
Initially, new leaseholders would lack influence in management decisions, and the seller may lose motivation to resolve existing issues without a direct financial stake.
Navigating Co-freeholder Disputes: A Cause for Concern?
Chun Wong explains: Disputes with a co-freeholder must be disclosed on conveyancing forms when selling the leasehold, potentially deterring future buyers.
Problems between leaseholders or freeholders are amplified in smaller blocks with just two flats, where disagreements can become entrenched without court intervention.
Careful consideration must be given to living in a property with strained relations with neighbours and fellow lease/freeholders.
Paula Higgins elaborates: Neighbour disputes are particularly alarming. An unreasonable co-leaseholder can transform a dream home into a constant source of stress.
Such situations rarely improve and can severely affect well-being and mental health.
Mike Hansom notes: Lease problems are manageable with cooperation. However, lacking cooperation, imperfect documentation provides ample grounds for conflict.
For instance, unanimous agreement may be required for all freehold decisions, potentially leading to deadlock.
While the dispute might be personality-based and not extend to new owners, it remains a considerable risk with long-term implications if unresolved after purchase.
Resale Challenges: Can the Seller Find Another Buyer?
Mike Hansom states: Properties burdened by disputes are often difficult to sell.
Standard Property Information Forms in conveyancing inquire about disputes, likely alerting any potential buyer.
Chun Wong observes: The seller’s willingness to transfer the freehold at no extra cost suggests urgency to sell, possibly due to prolonged issues with the co-freeholder.
Disclosure of the ongoing dispute is mandatory for any new buyer unless resolved before sale completion.
New buyers will expect standard freeholder forms, and a non-cooperative freeholder is likely to impede and prolong any sale process.
Final Verdict: Should the Buyers Proceed?
Paula Higgins advises: Despite the appeal of the flat, the numerous significant issues and the neighbour’s refusal to sign the TR1 are serious concerns.
Reconsider if this property is truly the right choice.
Solicitors flag these issues to protect buyers from genuine risks with long-term financial and well-being repercussions.
Though emotionally difficult after time and money investment, withdrawing could prevent years of stress, conflict, and unforeseen expenses.
Buyers who withdraw from problematic purchases often express relief, not regret.
A suitable property should not present so many red flags before moving in. Legal advisors are acting in the buyers’ best interests, aiming to prevent a potentially costly mistake.
Mike Hansom concludes: The solicitor is right to raise significant concerns. A home should offer respite from life’s stresses, but this property might become a major source of stress.
Financially, there’s a substantial risk of significant litigation costs to resolve current and future disagreements.
Regrettably, withdrawing from the purchase is advisable.
Beyond the stress of a dispute-ridden property, considerable legal fees and future resale difficulties are highly likely.