Wednesday, 29 October 2014

What is a Flying Freehold?


Some people may have heard of these but are unsure what they are. And although they are rare it is important to know what they are for when they do appear.

Flying Freehold

A flying freehold is a section of a freehold property that is structurally above another person's property and not connecting with ground level. Flying freeholds arise when part of one property is built on top of part of another property and so the upper property owner does not own the building or land underneath the "flying" part. A common example of this is where a room or part of a room is over a shared passageway in a row of terraced houses. A flying freeholder is subject to the risk that the subjacent owner may fail to maintain and repair its property, which may damage or prejudice the structure on which the flying freehold physically rests. A subjacent owner can be required to physically support and repair in relation to the freehold above it.

So what implications does this have when you are looking to purchase a property that may be subject to a flying freehold? The main concern is whom the obligations of support, maintenance and repair fall on and can those obligations be enforced. The problem here is that the burden or obligations of a positive covenant generally cannot be passed on from owner to owner, as they do not follow the land unlike restrictive covenants. In order for a positive obligation to perpetuate each owner needs to enter into a Deed of Covenant to observe and perform the positive obligations.

Through the passage of time, as flying freeholds tend to affect older properties, these obligations can become lost and the chain of a deed of covenant can break down. This therefore means that without this chain the property is left with no rights of support, access and repair.

There are solutions to this problem, the first being to enter into a Deed of Mutual Easement and Covenants with the neighbouring property. Both property owners enter into a deed of mutual easements and covenants, granting the necessary rights of support and protection, access for repair and maintenance for each other’s properties and imposing obligations on both parties to keep their own property in repair and insured and to reinstate if damaged. This is of course reliant on the co-operation of the neighbouring property owners and can add further time and money to a transaction.

The second solution is to obtain an indemnity insurance policy for a flying freehold. This is not the ideal solution as it simply papers over the cracks of the problem and does not fully resolve it. A primary concern with flying freeholds is not necessarily the rights to repair and maintain but the rights of access to be able to carry out repairs. An indemnity policy does not grant this.

Lenders are reluctant to lend on flying freeholds for these very reasons. They want to ensure the security for the mortgage is sound. As conveyancers we are bound to follow the guidelines set out in the CML handbook (http://solicitorsnews.blogspot.co.uk/2014/09/a-solicitors-dual-duty.html). One of the key points they ask in relation to flying freeholds and indeed freehold flats is that we can certify that the title is good and marketable. If the rights have been lost, do not exist or are difficult to obtain then the marketability of that property is reduced.

Freehold Flats

Very little explanation is needed as to what these are as it is right there in the name, it is a flat which is held and sold as freehold as opposed to leasehold.

The problem with this type of property is that very few lenders will lend on these. Going back to the CML handbook the first requirement to meet on this type of property is “the property must have all necessary rights of support, protection, and entry for repair as well as a scheme of enforceable covenants that are also such that subsequent buyers are required to enter into covenants in identical form”.

In an ordinary flat sold as leasehold these rights would all be contained within the lease. The lease would provide for payments from each leaseholder to contribute toward maintenance, repair and insurance. With a freehold no such document exists, therefore each freeholder is responsible for his or her own unit. But if you have a block of freehold flats and there is a problem with the roof, who has the responsibility for repair? If a unit on the second floor does not have insurance and then floods their property affecting the unit below, who is responsible for the repair? Does the unit on the ground floor have to claim on their own insurance, pushing up their own premiums?

The final key point to consider from the CML handbook extract above is rights of access. Again in a leasehold flat these rights would be contained within the lease. As conveyancers we need to ensure that you as the purchaser have the relevant rights to access your property. With a freehold flat where are the rights of access to the property contained, and where are the rights of access through communal areas to a second floor flat for example.

As stated above, very few lenders will lend on a freehold flat. But even if you are a cash buyer it is an investment which would need serious consideration. At some point in the future you may want to sell this property and lenders will be unlikely to provide potential buyers with a mortgage. In practice freehold flats are rare but they are something you need to be aware of, especially those reliant on a mortgage.

Article written by Michael Riches - Trainee with MJP Conveyancing  



MJP Conveyancing are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

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