Leasehold Property Classes – Good Leasehold

When buying a property which is leasehold, it will be registered with one of two classes of title – absolute leasehold or good leasehold. Ideally you will want the property to have absolute title however in the event that it is good leasehold this needn’t be a deal breaker. You may be able to insure against the risks which it presents or you may be able to upgrade to absolute title.

The first thing is to know how to recognise good leasehold title. If the property is registered then this is simple, just look at section B of the Official Copies and immediately under the heading you will see either “Absolute Leasehold” or “Good Leasehold”. If the title is unregistered it is less straightforward, you will need to check the landlord’s freehold title going back at least 15 years.

What is Good Leasehold Title?

When registering land for the first time the Land Registry will have to decide what class of title to award the property. If the land is leasehold it will either award good leasehold title or absolute leasehold. Good leasehold title will be granted where the applicant has been able to prove title to the lease but is unable to provide deeds proving the landlord’s title (and so his right to grant the lease).

The danger of the landlord’s right to grant the lease having not been proved is that if someone comes along in future who can prove they owned the freehold title at the time the lease was granted and they did not grant it, it may be deemed to be invalid and be brought to an immediate end.

Good Leasehold Title Indemnity Insurance

There are two ways to deal with good leasehold title, either by upgrading to absolute leasehold title or by purchasing good leasehold title indemnity insurance. A legal indemnity insurance policy is a special type of insurance which protects against legal risks. The premium is paid just once (i.e. not monthly or annually) and the policy usually continues in perpetuity (forever). Typically a good leasehold title policy will cost £30 – £50.

It will cover losses in the event that a person claiming to own the freehold challenges the validity of the lease, including legal costs and in the event that the challenge is successful and the lease is voided, the resulting loss to the leaseholder (i.e. whatever the lease was worth on the open market before it was voided).

Upgrading to Absolute Leasehold Title

An application to upgrade to absolute leasehold title is made using Land Registry form UT1.

The application must include evidence of the landlord’s title to the freehold. Sometimes, although the freehold title was not registered with Land Registry when the lease was granted, it will have registered since. If this is the case then you will just need to supply official copies of the freehold title. If the freehold is unregistered, you will need to obtain an “abstract” of the landlord’s title showing a chain of ownership starting with the current landlord and going back 15 years.

An abstract of title is obtained by a solicitor taking the title deeds for the freehold and preparing a written summary, which the solicitor then confirms has prepared based on the original title deeds. This has to be prepared because the landlord will not hand over the title deeds to the leaseholder to be sent to the Land Registry.

Good Leasehold Title in Sheffield and East Lancashire

In certain areas of the country, most notably Sheffield and the East Lancashire towns of Blackburn, Bury and Bolton, good leasehold title is particularly common for houses (as opposed to flats) which are leasehold. These houses are usually subject to leases granted back in the 19th or early 20th centuries for terms of 999 years at rents of just a few pounds per year. Although the rents were worth collecting at the time they do not increase with inflation therefore they have gradually become less and less valuable and as a result the freeholds have often been abandoned.

It is common practice in such areas for a solicitor who is local and knows the area to certify that there is no practical risk of the freehold returning to challenge the lease and good leasehold title is often accepted without the requirement for indemnity insurance or upgrade.

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