Buying freehold. Adding mortgage charge to title
Discussion
Over 12 months ago, I negotiated a fee with the management company to buy the freehold. Once agreed, I paid them and they duly sent me the relevant docs including details of the freehold from land registry in the name of my wife and I. I didn't involve a solicitor to do so.
I didn't inform the mortgage company at the time, but after informing them that I purchased the freehold, they now want a charge adding to the title by way of additional security deed.
Do I need to do this using a solicitor or can I update this with the land registry direct?
I didn't inform the mortgage company at the time, but after informing them that I purchased the freehold, they now want a charge adding to the title by way of additional security deed.
Do I need to do this using a solicitor or can I update this with the land registry direct?
Evening
I set out my thoughts below in case they help. Obviously I do this without looking into any of the details of your case or holding myself out as having any special expertise. In other words, I don’t owe you a duty of care or guarantee I’m correct - I’m just some bloke on a car forum.
I’m guessing from your post that:
1. Your bank has an existing charge over a long leasehold interest in your property and they were happy with (just) that as security originally; and
2. You haven’t requested additional lending.
If both 1 and 2 are correct, personally I’d consider telling your bank to F Off on the basis that the loan to value hasn’t changed and the securitised title hasn’t changed either. Ask them to show you where in the existing (leashold) charge or loan facility it obliges you to grant a charge over the freehold. If they can’t do this, then you probably have room to argue.
The bank will be worried that, as you’re now your own landlord, you could terminate the lease which they have security over. However, I suspect that you are unlikely to be able to do this without being in clear breach of your mortgage terms and having difficulty at the Land Registry. On this basis the bank seem to be being a little risk averse.
If I’m wrong about 2, and they’ve loaned you more money (or if you’re in arrears) then you’ll probably end up having to do whatever they tell you to do.
If you give them the freehold charge the bank will want you to use a lawyer. One reason for this is for them to ensure that you had legal advice before you grant the new charge over the freehold (so you can’t later allege the bank has had any undue influence on you etc).
If you have to do what the bank want and put a new charge in place over the freehold using their panel lawyer, you should at least be able to reduce your costs by insisting that the bank do not require the solicitor to undertake conveyancing searches or produce a report on title (on the basis that the bank should already have done this when they took the charge over the leasehold title). In which case, you might only be looking at around £300 plus VAT and a Land Registry fee as a worst case scenario.
Hopefully that helps a bit. Sorry if it doesn’t.
I set out my thoughts below in case they help. Obviously I do this without looking into any of the details of your case or holding myself out as having any special expertise. In other words, I don’t owe you a duty of care or guarantee I’m correct - I’m just some bloke on a car forum.
I’m guessing from your post that:
1. Your bank has an existing charge over a long leasehold interest in your property and they were happy with (just) that as security originally; and
2. You haven’t requested additional lending.
If both 1 and 2 are correct, personally I’d consider telling your bank to F Off on the basis that the loan to value hasn’t changed and the securitised title hasn’t changed either. Ask them to show you where in the existing (leashold) charge or loan facility it obliges you to grant a charge over the freehold. If they can’t do this, then you probably have room to argue.
The bank will be worried that, as you’re now your own landlord, you could terminate the lease which they have security over. However, I suspect that you are unlikely to be able to do this without being in clear breach of your mortgage terms and having difficulty at the Land Registry. On this basis the bank seem to be being a little risk averse.
If I’m wrong about 2, and they’ve loaned you more money (or if you’re in arrears) then you’ll probably end up having to do whatever they tell you to do.
If you give them the freehold charge the bank will want you to use a lawyer. One reason for this is for them to ensure that you had legal advice before you grant the new charge over the freehold (so you can’t later allege the bank has had any undue influence on you etc).
If you have to do what the bank want and put a new charge in place over the freehold using their panel lawyer, you should at least be able to reduce your costs by insisting that the bank do not require the solicitor to undertake conveyancing searches or produce a report on title (on the basis that the bank should already have done this when they took the charge over the leasehold title). In which case, you might only be looking at around £300 plus VAT and a Land Registry fee as a worst case scenario.
Hopefully that helps a bit. Sorry if it doesn’t.
OP, choose a response from the following (in descending order of politeness)
1.I’m not sure I quite understand. I’d be grateful if you would explain why you think I have to give you new security over the freehold.
2. I may be willing to consider your request, but I’d obviously need to take legal advice before doing so. I don’t want to be out of pocket for that, though - please confirm you’ll fund it, or I’m not willing to take this any further.
3. You have your security over the leasehold title, why should I be restricted from dealing with the freehold however I see fit?
4. Sorry, but no.
5. Why on earth would I do that?
6. f
k right off.
I’d suggest starting with 1 or 2, but depending on what they say, being ready to move swiftly down the list.
How on earth did it even come to the lender’s attention?
1.I’m not sure I quite understand. I’d be grateful if you would explain why you think I have to give you new security over the freehold.
2. I may be willing to consider your request, but I’d obviously need to take legal advice before doing so. I don’t want to be out of pocket for that, though - please confirm you’ll fund it, or I’m not willing to take this any further.
3. You have your security over the leasehold title, why should I be restricted from dealing with the freehold however I see fit?
4. Sorry, but no.
5. Why on earth would I do that?
6. f
k right off.I’d suggest starting with 1 or 2, but depending on what they say, being ready to move swiftly down the list.
How on earth did it even come to the lender’s attention?
RichardDastardly said:
Evening
I set out my thoughts below in case they help. Obviously I do this without looking into any of the details of your case or holding myself out as having any special expertise. In other words, I don’t owe you a duty of care or guarantee I’m correct - I’m just some bloke on a car forum.
I’m guessing from your post that:
1. Your bank has an existing charge over a long leasehold interest in your property and they were happy with (just) that as security originally; and
2. You haven’t requested additional lending.
If both 1 and 2 are correct, personally I’d consider telling your bank to F Off on the basis that the loan to value hasn’t changed and the securitised title hasn’t changed either. Ask them to show you where in the existing (leashold) charge or loan facility it obliges you to grant a charge over the freehold. If they can’t do this, then you probably have room to argue.
The bank will be worried that, as you’re now your own landlord, you could terminate the lease which they have security over. However, I suspect that you are unlikely to be able to do this without being in clear breach of your mortgage terms and having difficulty at the Land Registry. On this basis the bank seem to be being a little risk averse.
If I’m wrong about 2, and they’ve loaned you more money (or if you’re in arrears) then you’ll probably end up having to do whatever they tell you to do.
If you give them the freehold charge the bank will want you to use a lawyer. One reason for this is for them to ensure that you had legal advice before you grant the new charge over the freehold (so you can’t later allege the bank has had any undue influence on you etc).
If you have to do what the bank want and put a new charge in place over the freehold using their panel lawyer, you should at least be able to reduce your costs by insisting that the bank do not require the solicitor to undertake conveyancing searches or produce a report on title (on the basis that the bank should already have done this when they took the charge over the leasehold title). In which case, you might only be looking at around £300 plus VAT and a Land Registry fee as a worst case scenario.
Hopefully that helps a bit. Sorry if it doesn’t.
Richard, thanks for the reply. I actually didnt consider what interest the mortgage company might have in me owning the freehold however, if I was ever to change lender, then surely this would result in me having to remove them from the freehold again? I set out my thoughts below in case they help. Obviously I do this without looking into any of the details of your case or holding myself out as having any special expertise. In other words, I don’t owe you a duty of care or guarantee I’m correct - I’m just some bloke on a car forum.
I’m guessing from your post that:
1. Your bank has an existing charge over a long leasehold interest in your property and they were happy with (just) that as security originally; and
2. You haven’t requested additional lending.
If both 1 and 2 are correct, personally I’d consider telling your bank to F Off on the basis that the loan to value hasn’t changed and the securitised title hasn’t changed either. Ask them to show you where in the existing (leashold) charge or loan facility it obliges you to grant a charge over the freehold. If they can’t do this, then you probably have room to argue.
The bank will be worried that, as you’re now your own landlord, you could terminate the lease which they have security over. However, I suspect that you are unlikely to be able to do this without being in clear breach of your mortgage terms and having difficulty at the Land Registry. On this basis the bank seem to be being a little risk averse.
If I’m wrong about 2, and they’ve loaned you more money (or if you’re in arrears) then you’ll probably end up having to do whatever they tell you to do.
If you give them the freehold charge the bank will want you to use a lawyer. One reason for this is for them to ensure that you had legal advice before you grant the new charge over the freehold (so you can’t later allege the bank has had any undue influence on you etc).
If you have to do what the bank want and put a new charge in place over the freehold using their panel lawyer, you should at least be able to reduce your costs by insisting that the bank do not require the solicitor to undertake conveyancing searches or produce a report on title (on the basis that the bank should already have done this when they took the charge over the leasehold title). In which case, you might only be looking at around £300 plus VAT and a Land Registry fee as a worst case scenario.
Hopefully that helps a bit. Sorry if it doesn’t.
I havent took on any additional borrowing to purchase it, it was a nominal fee plus admin charges (more than the nominal fee unsurprisingly) however, I am looking to borrow more in the near future to extend the property. When they were going through the DIP, they questioned how many years left on lease (its a 999 year lease) and I told them i'd bought it. It was then that they wanted copies of Freehold title from Land registry, which I then gave them.
They said I can proceed with the DIP on the basis of it being leasehold (as on their records it is) provided i'm happy that it can be valued on that principle and I can deal with the freehold stuff separately (as I have builders lined up waiting to buy materials and start work within 8 weeks).
I did think that i'd done my homework on buying the freehold however, now not so sure if i've missed something in not instructing a solicitor to dot the I's for me.
Edited by Chicken Chaser on Wednesday 20th February 21:55
Chicken Chaser said:
Richard, thanks for the reply. I actually didnt consider what interest the mortgage company might have in me owning the freehold however, if I was ever to change lender, then surely this would result in me having to remove them from the freehold again?
I havent took on any additional borrowing to purchase it, it was a nominal fee plus admin charges (more than the nominal fee unsurprisingly) however, I am looking to borrow more in the near future to extend the property. When they were going through the DIP, they questioned how many years left on lease (its a 999 year lease) and I told them i'd bought it. It was then that they wanted copies of Freehold title from Land registry, which I then gave them.
They said I can proceed with the DIP on the basis of it being leasehold (as on their records it is) provided i'm happy that it can be valued on that principle and I can deal with the freehold stuff separately (as I have builders lined up waiting to buy materials and start work within 8 weeks).
I did think that i'd done my homework on buying the freehold however, now not so sure if i've missed something in not instructing a solicitor to dot the I's for me.
I’m not sure I’m quite following what you’re saying but if you are asking them for more and they require a charge over the freehold (too) in order to lend then you have to male your choice - if you want the extra advance, you’ll probably need to grant their request.I havent took on any additional borrowing to purchase it, it was a nominal fee plus admin charges (more than the nominal fee unsurprisingly) however, I am looking to borrow more in the near future to extend the property. When they were going through the DIP, they questioned how many years left on lease (its a 999 year lease) and I told them i'd bought it. It was then that they wanted copies of Freehold title from Land registry, which I then gave them.
They said I can proceed with the DIP on the basis of it being leasehold (as on their records it is) provided i'm happy that it can be valued on that principle and I can deal with the freehold stuff separately (as I have builders lined up waiting to buy materials and start work within 8 weeks).
I did think that i'd done my homework on buying the freehold however, now not so sure if i've missed something in not instructing a solicitor to dot the I's for me.
Edited by Chicken Chaser on Wednesday 20th February 21:55
You are correct that if you change lender, this lender’s charge will need to be removed from the FH too but that would be part of the remortgage process. Worth making a mental note to check that’s dealt with though, because the conveyancer dealing might assume there’s only the LH to deal with.
I’m assuming that this is a singe long leasehold house - ie there’s only your property on the freehold you’ve bought. If so, to be honest it might be worth taking advice about extinguishing the leasehold interest. If it wasn’t for the charge, the two titles would have merged now as a matter of law, and making the property a simple freehold would have advantages for simplicity and quite possibly free you from tenant covenants that neighbours can theoretically enforce (you obviously don’t need to worry about the landlord getting narky anymore
)I would look at merging the two titles at the land registry and transferring the charge to the merged title.
Whilst this may be a bit of a hassle it will make things much simpler going forward when you want to remortgage or even sell the property.
There is nothing to be gained from being awkard with the mortgagee.
Whilst this may be a bit of a hassle it will make things much simpler going forward when you want to remortgage or even sell the property.
There is nothing to be gained from being awkard with the mortgagee.
Last word on this from me:
I agree with what’s said above, but, if you do decide you want to try to persuade your existing lender to give you a further loan amount without any new legal fees being paid, the argument I would look to run to the lender is:
1. The existing charge is an “all monies charge”, and so the existing charge will secure the extra loan amount as well as the original amount (this assumes that your current charge does not have a capped max amount that it applies to and that it does not state that it only relates to the original lending - both of which would be unusual if it’s a high street lender); and
2. The existing charge is over the interest which has the value, the freehold has only nominal value and therefore there is no commercial point to having a charge over the freehold.
The problem is, whilst I think the argument above is logical and I’ve seen it work in the commercial context, the person at the lender who is likely to make the decision about whether to give you further drawdown will probably not engage their brain much and will just ask for everything they can.
Probably worth trying to push it at first if you don’t need the money quickly and have a good loan to value, but resign yourself to having to do what you’re told if the lender insists.
Good luck!
I agree with what’s said above, but, if you do decide you want to try to persuade your existing lender to give you a further loan amount without any new legal fees being paid, the argument I would look to run to the lender is:
1. The existing charge is an “all monies charge”, and so the existing charge will secure the extra loan amount as well as the original amount (this assumes that your current charge does not have a capped max amount that it applies to and that it does not state that it only relates to the original lending - both of which would be unusual if it’s a high street lender); and
2. The existing charge is over the interest which has the value, the freehold has only nominal value and therefore there is no commercial point to having a charge over the freehold.
The problem is, whilst I think the argument above is logical and I’ve seen it work in the commercial context, the person at the lender who is likely to make the decision about whether to give you further drawdown will probably not engage their brain much and will just ask for everything they can.
Probably worth trying to push it at first if you don’t need the money quickly and have a good loan to value, but resign yourself to having to do what you’re told if the lender insists.
Good luck!
Thanks for the replies, the mortgage co is one of the biggest national lenders (hint) so i'm not dealing with a 2 bit building society.
I know that they will have interest over the leasehold, and for some reason the title hasnt been merged as one, could this be because I didnt have any legal representation on my side and the management company simply sold their freehold interest to me?
Checking the land registry website, it seems that both leasehold and freehold are showing against the property which after a look around, doesnt seem to be uncommon with stuff like this. It is a long lease house rather than a shared occupancy.
Customer services seem to be fairly satisfied that I can take the extra borrowing based upon leasehold and deal with this issue at a later date. I'll have to remortgage the lot anyway once I've built the house so that I can knock the LTV down as i'm taking most of whats available in equity to get the build done.
I know that they will have interest over the leasehold, and for some reason the title hasnt been merged as one, could this be because I didnt have any legal representation on my side and the management company simply sold their freehold interest to me?
Checking the land registry website, it seems that both leasehold and freehold are showing against the property which after a look around, doesnt seem to be uncommon with stuff like this. It is a long lease house rather than a shared occupancy.
Customer services seem to be fairly satisfied that I can take the extra borrowing based upon leasehold and deal with this issue at a later date. I'll have to remortgage the lot anyway once I've built the house so that I can knock the LTV down as i'm taking most of whats available in equity to get the build done.
bladebloke said:
OP, choose a response from the following (in descending order of politeness)
1.I’m not sure I quite understand. I’d be grateful if you would explain why you think I have to give you new security over the freehold.
2. I may be willing to consider your request, but I’d obviously need to take legal advice before doing so. I don’t want to be out of pocket for that, though - please confirm you’ll fund it, or I’m not willing to take this any further.
3. You have your security over the leasehold title, why should I be restricted from dealing with the freehold however I see fit?
4. Sorry, but no.
5. Why on earth would I do that?
6. fk right off.
I’d suggest starting with 1 or 2, but depending on what they say, being ready to move swiftly down the list.
How on earth did it even come to the lender’s attention?
"You've broken the conditions set out in the 300 pages of tiny small print, please pay the remainder of your mortgage within 28 days" 1.I’m not sure I quite understand. I’d be grateful if you would explain why you think I have to give you new security over the freehold.
2. I may be willing to consider your request, but I’d obviously need to take legal advice before doing so. I don’t want to be out of pocket for that, though - please confirm you’ll fund it, or I’m not willing to take this any further.
3. You have your security over the leasehold title, why should I be restricted from dealing with the freehold however I see fit?
4. Sorry, but no.
5. Why on earth would I do that?
6. f
k right off.I’d suggest starting with 1 or 2, but depending on what they say, being ready to move swiftly down the list.
How on earth did it even come to the lender’s attention?
Possible.
I would expect there to be something in the t&cs somewhere.
I can see a potential legal loophole where a leaseholder with a charge against it, acquires the freehold, some how brings the lease to an end, perhaps by violating the lease, returning the property to themselves with no charge on the property any more.
I can see a potential legal loophole where a leaseholder with a charge against it, acquires the freehold, some how brings the lease to an end, perhaps by violating the lease, returning the property to themselves with no charge on the property any more.
Upon purchase of the freehold the lease is effectively cancelled. You cannot as a freeholder grant yourself a lease of the same property. They therefore can't enforce the Charge against the property and so don't have any security other than the contract with yourself.
You need to agree to include the Freehold as security before they ask for their money back. Ask them for a lower interest rate as they have enhanced security
You need to agree to include the Freehold as security before they ask for their money back. Ask them for a lower interest rate as they have enhanced security
Cant remember if the same for residential mortgages but potentially is the same. The freehold and leasehold has to be in separate names to make them separate legal entities, as if they need to evict the leaseholder then they need permission from the freeholder to do so,
Not something I've ever had to deal with legally but something I need to be aware of in underwriting.
Not something I've ever had to deal with legally but something I need to be aware of in underwriting.
MJG280 said:
Upon purchase of the freehold the lease is effectively cancelled. You cannot as a freeholder grant yourself a lease of the same property. They therefore can't enforce the Charge against the property and so don't have any security other than the contract with yourself.
You need to agree to include the Freehold as security before they ask for their money back. Ask them for a lower interest rate as they have enhanced security
Sounds like it's going to cost me more money in legal fees to sort it then! You need to agree to include the Freehold as security before they ask for their money back. Ask them for a lower interest rate as they have enhanced security
Upon purchase of the freehold the leasehold title is NOT automatically cancelled. The Land Registry do not do this unless you specifically apply for the leasehold title to be merged with the freehold title (acquiring the reversionary title to an existing lease when you are the tenant is not the same as a surrender of the lease (which would end the lease and put you in breach of your mortgage) or the purported grant of a new lease from you to you (which would be invalid)).
As long as you still have a separate leasehold title number at the Land Registry that exists and is charged to your lender you will not be in breach of your mortgage conditions and there will not be any realistic danger of you having to pay off the mortgage in 28 days etc.
It’s just a question of whether you can get the extra lending without having to pay significant legal fees (which is probably unlikely).
As long as you still have a separate leasehold title number at the Land Registry that exists and is charged to your lender you will not be in breach of your mortgage conditions and there will not be any realistic danger of you having to pay off the mortgage in 28 days etc.
It’s just a question of whether you can get the extra lending without having to pay significant legal fees (which is probably unlikely).
RichardDastardly said:
Upon purchase of the freehold the leasehold title is NOT automatically cancelled. The Land Registry do not do this unless you specifically apply for the leasehold title to be merged with the freehold title (acquiring the reversionary title to an existing lease when you are the tenant is not the same as a surrender of the lease (which would end the lease and put you in breach of your mortgage) or the purported grant of a new lease from you to you (which would be invalid)).
As long as you still have a separate leasehold title number at the Land Registry that exists and is charged to your lender you will not be in breach of your mortgage conditions and there will not be any realistic danger of you having to pay off the mortgage in 28 days etc.
It’s just a question of whether you can get the extra lending without having to pay significant legal fees (which is probably unlikely).
This makes sense from the situation i find myself in. There are 2 different title numbers held by land registry on this place now. The lender is satisfied to lend further based on the leasehold title, I have been told I can sort out the freehold issue separately. I will get legal advice on this though and seek to have it merged, when I come to remortgaging once this is all done then it can be sorted as freehold. As long as you still have a separate leasehold title number at the Land Registry that exists and is charged to your lender you will not be in breach of your mortgage conditions and there will not be any realistic danger of you having to pay off the mortgage in 28 days etc.
It’s just a question of whether you can get the extra lending without having to pay significant legal fees (which is probably unlikely).
Thanks for all the advice, some conflicting admittedly but hopefully well meaning.
Chicken Chaser said:
This makes sense from the situation i find myself in. There are 2 different title numbers held by land registry on this place now. The lender is satisfied to lend further based on the leasehold title, I have been told I can sort out the freehold issue separately. I will get legal advice on this though and seek to have it merged, when I come to remortgaging once this is all done then it can be sorted as freehold.
Thanks for all the advice, some conflicting admittedly but hopefully well meaning.
There always would have been two titles - it’s just that now you happen to be the proprietor of both of them. Thanks for all the advice, some conflicting admittedly but hopefully well meaning.
Do definitely take advice about merging - it’s probably to you benefit to kill the lease but the solicitor will also have to check that you won’t lose anything by doing the same (eg easements that the lease granted with the demise).
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