An explanation of a good leasehold title

Are you considering purchasing a leasehold property? While it can be an affordable and convenient option, there are potential legal complications that you should be aware of. 

One such complication is the concept of a “good leasehold title”, where the leaseholder registers their leasehold without mentioning the freeholder as an owner of the land on the agreement with the land registry. 

This can lead to serious problems if the freeholder decides to make a claim on the land so in this text, we’ll discuss how to upgrade your leasehold to an absolute leasehold, the importance of researching your leasehold agreement, using the land registry to determine whether there is a good leasehold title or not.

What is the good leasehold title?

A good leasehold title refers to a situation where a leaseholder registers their leasehold without there being a mention of the freeholder as an owner of the land on the agreement with the land registry. This is something that can happen if there are no legal documents available to prove that the freeholder is in fact the owner of the land.

For instance, how this may work in real life is if there is a freeholder who perhaps has a very long lease on the land which is perhaps 900 years. Throughout the length of their lease, the people leasing the land from the freeholder may register with the land registry without the freeholder.

They will claim that the land and the property is their when in fact a leaseholder just has the right to a property. This can be a complicated legal situation and one that should be avoided for freeholders.

Can you buy a property with a good leasehold title?

It is in fact possible to be able to buy a property that has a good leasehold title. This would mean you buy the property from the leaseholder thinking they have the right to the land and the building but you don’t realise the land is still owned by the freeholder.

However, in some cases, it could just mean that the freeholder’s title is not registered but the freeholder is aware of this and they don’t want to be registered on the land any more.

In other cases, it could also just mean that there is a title defect on the leasehold title which would mean the land registry is not sure who the freeholder is and they cannot guarantee that there will be a claim on the land of the property.

Can a good leasehold title be a problem?

Most of the time, a good leasehold title is not actually a problem as there is rarely a third party claim on land if the freeholder is absent from the country, has passed away or has forgotten about their land and will not want to claim it.

Some freeholders are also very passive in the approach to dealing with their land and will not want to be involved in the title in any way for decades too so it will depend on the potential freeholder of the land.

The good news is, in order to prevent problems in the future, if you are aware of who the freeholder is, you are able to upgrade your leasehold to an absolute leasehold if you can prove to the land registry that the freeholder wants their title removed from the land.

What are the most common problems with good leasehold title properties?

Most commonly and where buyers get most of their problems is if they buy the leasehold for land without knowing who the freeholder is and then they get a claim for the land and they have to end up paying the freeholder money.

This can be prevented by taking out title good leasehold insurance.

What if I want to mortgage the property with a good leasehold title?

If you have a good leasehold title this means that when the lease was registered, the land registry did not receive a copy of the freeholder’s title deeds, resulting in a good leasehold title. 

This does not necessarily imply that the lease can be terminated, but it may imply that the leasehold title contains obligations or covenants that you are unaware of so most lenders will want to stay away from covenants like this. 

In general, a lender will want to make sure there is as little risk on a property as possible and there is very little that can go wrong so the buyer is able to successfully pay off their mortgage without intervention and the lender can make a return on their money. 

So, in order to ensure that you can in fact take out a mortgage for the property you have as a leaseholder, if you have a good leasehold title then you would need to provide evidence of the freehold title to the land registry. 

If this is not possible, indemnity insurance can be obtained to cover any financial losses that may occur as a result of the good leasehold title and a lender may  certainly suggest this or include it as part of one of their clauses to give you a loan.

All in all, a lot of this can be avoided if you obtained as much information about the leasehold before you went ahead with the purchase of the leasehold agreement. It could be the case that you go year before running into an issue like this so it is vital you do your research beforehand.

How does the good leasehold title relate to the land registry

If there is a good leasehold title, it means that the freeholder of the leasehold is not registered with the land registry so the land registry is very important in determining if there is a good leasehold title or not.

In general, the land registry is the ultimate place to find out all the information you need about a piece of land so be sure to stay up to date with it and search for a property if you need to.

The service is free and there are also contact details provided on the government’s website in case you have any questions.

What is the land registry?

The land registry can be found here and is a place where you can search for land and contact Her Majesty’s Land Registry which is able to produce all of the details you need about any land throughout the UK.

It is also possible to find land information based on the borough you live in. As an example, the land registry of wandsworth council has their own search directory and their own telephone line for those who are interested in land in the area to call in.

What’s the difference between a good leasehold title and an absolute leasehold title?

A good leasehold title is one where the freeholder is unknown or not included in the agreement of the leaseholder but an absolute title is one where the freeholder is found. 

This means the leaseholder would easily be able to be given a section 20 which is one of the big disadvantages of having a leasehold which is 

How can you upgrade to an absolute leasehold title?

In order to upgrade to an absolute leasehold title, the first thing you should do is make sure you contact the land registry to attempt to find out who the freeholder is and if you cannot do this then take out insurance.

Some of the time the freeholder may not actually be able to be found in which case you should find them the best you can be, tracking them down and attempting to find details but ultimately, there is very little that you can do a lot of the time.

Do you need a solicitor when dealing with a good leasehold title?

Getting a solicitor on board with setting up a good leasehold title can be a great idea to make sure you do not run into any legal issues and the process runs smoothly.

Solicitors can be great because they may be able to spot that a leasehold has a good leasehold title even if you think that it is an absolute leasehold so they can save you the time and money down the line to get this changed.

How does good leasehold Title Indemnity Insurance work?

Of course, if you have a good leasehold title, there is always the risk that the freeholder could make a claim for the land that the property is in. As a result, if you have a good leasehold title, you may want to take out insurance.

This protects you from the costs of any legal issues in case there was a claim as the process can be quite complicated as you go about finding if there is a title good on the property or not.

Wrapping things up

All in all, it is vital that you read up on what a good leasehold title and also the reasons are for buying a leasehold in the first palace as this may not actually be the right option for you.

There are other titles too such as possessory titles that you may find you have in your agreement and there can be legal complications for this too. So make sure you are aware of the rules.