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Advice please - First time buyer - buying house with insolvent/ absent freeholder

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sarah987

New Member
Hi,
I am currently in the process of buying my first house. The sellers advertised it as freehold as they have lived there since 2005 and not paid ground rent as the freeholder went bankrupt in 1995. My solicitor advised me when processing the sale that the property is not freehold, I saw the paperwork showing the company that owned the freehold went into liquidation. The lease has 800 years left on it. I asked my solicitor what the implications of this mean for me, but I am concerned he is not giving me full and impartial advice due to the fact he is working on no sale no fee basis. I have copied below what he advised me when I asked him to explain this in more detail:
" The Freeholder is insolvent and Absent indemnity insurance will be provided but this is far from ideal. More concerning is the title is not absolute we cannot advise you proceed until the title has been upgraded"
"The property is not freehold it is good leasehold which is lesser title to absolute title. This must be upgraded before you purchase it will only ever be leasehold. It s not freehold regardless of the freeholder company being insolvent this actually means the freehold has reverted to the crown and owned by her majesty"

Can anyone advise if this will cause issues when i go to resell in future? I have read that the seller needs to take out indemnity insurance at the point of selling, can anyone explain how this works and if it is expensive?
Would you advise I ask the sellers to reduce the price because of this ?
I'm not finding my solicitor the most helpful right now and also concerned this will take a long time for the sellers to resolve - as they need to amend the title as he states above.
Any advice from people who have been through this or with legal knowledge of this particular situation would be really helpful as I am bit worried right now.

Thanks in advance
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FWL

Member
I am no expert in this field but I would take independent legal advice. As far as I am aware, the indemnity insurance covers the potential cost of ground rent if, as suggested above, the crown was to come back and try to reclaim historic ground rent. If the seller is advertising this as freehold, which turns out to be incorrect, this would certainly set alarm bells ringing if I were in your situation. What else are they holding back on? Are they misleading you in any other ways?

Maybe this is why the property has not yet sold?
 
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diyhelp

Active Member
I think it is time to get a new solicitor because this could have serious consequences for the future if mistakes are made. Selling a property as a freehold, when it isn't, that is just bizarre. Why would any estate agent/solicitor acting on behalf of the seller allow/encourage them to do this?

This would set serious alarm bells ringing if I was in your situation.
 
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Longterminvestor

Administrator
Why not work out the potential outstanding ground rent and the cost of rectifying the property title. Use this as your leverage to drag the property price down - personally I would offer well below current price minus potential costs. As it stands, there is no way on earth anybody would buy the property as it is a legal mess. How desperate are they to sell the property? How desperate are you to buy?
 
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