The feudal system of freeholds and leaseholds still controls home ownership,
despite legal tweakings that now allow leaseholders to buy out their
freeholder.
Carol Vigurs had not made a study of this fascinating law when she put in an
offer for a flat. She paid a conveyancer to perform the necessaries and it was
only halfway through the transaction that she learned of marriage values - a
hefty sum designed to compensate freeholders for their loss of interest when a
lease with less than 80 years to run is extended. For leases of 70 years or less
this sum can work out at around 5% of the purchase price of the property, which
means a hefty bill. If the lease is less than 50 years, mortgage lenders shy
away.
"We contacted the Leasehold Advisory Service who advised us to proceed with
extreme caution since the lease had 70 years left," says Vigurs. "Realising that
the marriage value could amount to thousands of pounds and that the alternative
was a flat that deteriorated in value, we decided not to proceed with the
purchase." Whereupon her conveyancer presented a large bill for legal fees.
She feels that she should not have to pay since the conveyancer failed to
mention the 80-year rule at the outset and she incurred unnecessary expenses
organising searches and surveys. "I queried it with the Law Society and the
woman I spoke to had never heard of the 80-year rule either. I've been told that
conveyancers would only mention the rule if I had asked about it but that
presupposes that I already knew about it. How is the average first-time buyer
supposed to know this if even the Law Society has no clue?"
It's a familiar lament, according to a spokesman from the Leasehold Advisory
Service. "The problem starts with the marketing of the flat - estate agents
rarely seem to know the remaining term and are often reluctant to reveal it if
they do. Few purchasers take the trouble to search the title at the Land
Registry and so the term may only be revealed in the searches the conveyancing
solicitor carries out - for which, of course, he will charge fees."
According to the Law Society, which is investigating Vigurs' complaint,
conveyancing solicitors should always always advise on the consequences of short
leases and estimate the total costs of the purchase before proceeding.
The boom in flat conversions in the late 70s and early 80s means that many
99-year leases have only 70 years or less to run. So if you are thinking of
buying, establish whether it is leasehold and how long the lease has to run. You
can do this for £2 via the Land Registry at www.Landregisteronline.gov.uk.
For an overview of the law and free advice check out www.lease-advice.org.
