Defective Leases
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The interpretation of a lease varies widely and a lease which is acceptable to one conveyancer may not be acceptable to another. Many leases have defects which are usually minor in nature. This may be because of a poor description of the property, inaccurate plans, ambiguities, or omissions. In most cases the intention of the draftsman is obvious, and interpretation of the lease is quite straightforward. For example, a right of way to reach the property may not specifically set out exactly which parts of the building are subject to a right of way, but a visual inspection of the property will clearly show what was intended.
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In general terms, the older the lease is, the more likely it is to be defective. Leases written in the 1960s in general contained very little detail, whereas a modern lease can easily be forty or fifty pages long. Over the years legal opinion has changed and errors or omissions which were contained in a lease many years ago are now no longer acceptable.
A more recent complication is that UK Finance has produced guidelines (in their Mortgage Lenders Handbook) on what is, or is not, acceptable. Although this has instructions for conveyancers to adhere to there is some ambiguity and this still leaves some scope for interpretation. Furthermore, this Handbook can be used as a weapon by a buyer’s conveyancer to insist on a Deed of Variation to rectify the lease in many situations where a more reasonable attitude would be to accept minor defects.
This is a very unsatisfactory situation since a lease can only be varied by a Deed of Variation executed by the lessee and the freeholder. (Occasionally it may be possible to obtain a letter from the freeholder or their solicitors confirming an interpretation of the lease if the defect is only a minor one.) It would therefore be necessary to approach the freeholder or their solicitors to obtain their consent to a Deed of Variation. In most cases they will agree to this but the lessee will be responsible for the freeholder’s solicitors’ costs and possible those of a surveyor also, if appropriate.
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Plans
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Older leases often contain plans which are completely inadequate by
modern standards. Provided the flat is clearly defined this does not
usually cause a problem but it may do so if the common parts are not
clearly shown or the colouring in the plan is not clear. Some leases
contain plans which are wrong and older leases sometimes have no
plans in at all.
It is now Land Registry practice not to accept a lease plan unless it
complies with their strict requirements. Although this means that new
leases will almost always contain a good plan, it does mean that if you
are required to update a plan in an existing lease you will probably need
to appoint an architect or a surveyor to prepare a plan which is good
enough for the Land Registry.
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Buildings insurance
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Most leases contain a clause stating that buildings insurance must be taken out by the freeholder to cover the usual risks, and some leases list these items in detail, whereas others refer to “the usual risks” or similar. Older leases will often refer to fire and aircraft damage without any further details. The CML Handbook states that all the common risks must be covered, including subsidence, and the buyer’s conveyancers will check the policy to ensure that there are no exclusions. However, in practice all buildings insurance policies are very similar, although occasionally subsidence is excluded, or there is a large excess.
We do not consider it necessary to ask for a variation to a lease simply because the buildings insurance clause is inadequate but many conveyancers do not agree and will ask for a Deed of Variation to cover this point.
Lessor’s enforcement covenant
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All leases contain covenants which must be obeyed by the individual lessees. Typically these are not to make a noise after 11.00 p.m., not to carry out any alterations without the freeholder’s consent, not to obstruct the common parts, not to carry out any immoral act etc. Most leases contain a special clause known as the enforcement covenant which requires the freeholder to take action against a lessee if another lessee complains. If, for example, the owner of the flat below you is taking out a supporting wall and you are concerned that they are not making the necessary arrangement to protect the structure of the building then you need to be able to take action to prevent further work. Since a lease is a document which controls the relationship between individual lessees and the freeholder then you cannot take direct action against another lessee. This can be only be done via the freeholder and most leases contain the enforcement covenant which requires the freeholder to take action against a lessee if required to by another lessee, subject to payment of their costs.
Older leases do not always contain an enforcement covenant in which case it is necessary to obtain a Deed of Variation to rectify this. You will need to pay the freeholders conveyancer’s costs.
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Rectification
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Most freeholders will accept the need for a Deed of Variation but they are not obliged to do so. The legal situation is that a lease is fixed at the time when it is first granted and the freeholder is not obliged to make any variations at all during the length of the lease. There are exceptions to this, and some legislation will allow you to force the freeholder to make variations to the lease which they would not otherwise agree to, but this involves litigation and would only be worth considering in the most extreme cases as the costs are likely to be considerable.
Rectifying a defective lease is usually a lengthy process
since there will need to be correspondence between the
buyer’s and seller’s conveyancers, between them and the
freeholders or their conveyancers (or both) and possibly
the managing agents (if any) as well. Even with the
benefit of emails this can still take a considerable time,
particularly if the freeholder is not very responsive. They
are frequently uncooperative and very slow to deal with
matters they consider to be of no importance.
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There is also the matter of costs. The freeholder will ask
a "consideration" - maybe several thousand pounds and
you will have to pay for the legal costs as well and even surveyors costs if they are involved.
If there is a share of the freehold then some of the above points do not apply but, once again, this is open to interpretation. Some conveyancers will insist on a lease extension where the lease is short, even if there is a share of the freehold. The same applies to some defects but not others. Minor defects are usually acceptable, but not always. There is an advantage with a share of the freehold in that quite often the other lessees will not insist on appointing solicitors, and it may be quicker and cheaper to deal with a Deed of Variation but this is not always the case.
