Topic 4 - Principles of Mortgage and Property Law Flashcards
Freehold -
Estate in fee simple absolute in possession
Leasehold -
Estate for a term of years absolute
Cuius est solum, eius est usque ad coelum et ad inferos
Whoever owns the soil owns everything up to the heavens and down to the deposits of the earth
The priority of charges is determined by…
…the data order of registration.
On unregistered land it’s the lender who holds the title deeds. Subsequent charges will be recorded with the land charges registry
Second charges present the lender with higher risk so are likely to be…
…offered at higher rates of interest or with higher tariffs of charges and fees.
Joint tenancy -
Most common type of ownership.
Each person owns 100 % on death any joint owner takes over legal ownership automatically and wills cannot alter this.
Tenants in common -
The joint legal owners are one single owner, as trustees of the land, but each is also the beneficial owner of a defined interest in the property as agreed between them.
A restriction is placed on the title at the Land Registry, preventing either party selling the property without agreement from the co-owner.
It can be useful when a someone wants to leave their share to someone else rather than the joint owner.
Ground rent:
Paid by the leaseholder to the freeholder. It is typically low, between £50 and £200 a year.
Qualifying tenants, who have held a lease for longer than 2 years have the right to buy a new lease, increasing the lease by 90 years. No ground rent is paid during this term.
Leases may carry out constraints such as on:
- Specific conditions relating to maintenance and repairs
- Use of the property
- Alterations or enlargement
- In respect of common areas
A typical requirement for a mortgage for a leasehold property is:
30-40 years more than the mortgage term.
Enfranchisement:
The right of owners of leasehold properties in a building to joint together to buy the freehold.
The qualifying criteria are:
-Building must contain two or more flats
- At least 2/3 must be held on a long lease
- No more than 25% of the building can be used for non-residence purposes
- At least 50% of the leaseholders must agree to participate
Buying a freehold of a flat:
Must be qualifying tenants
Original lease on flat more than 21 years
Building must have more than 2 flats
At least 2/3 of flats must have leases which were granted originally for more than 21 years
No more than 25% of internal floor area must be non-residential
At least 50% of leaseholders in block must agree to participate. Those who don’t can agree a lease with new freeholders
What are the 3 significant property acts of 1925
Law of property Act
Land Charges Act
Land Registration Act
What is fee simple
The right for property to be inherited on death.
What is absolute
No limits on ownership
What is “in possession”
Immediate entitlement to occupation: nobody else has a prior claim.
Terms of years absolute means:
Leasehold estate, which has a limited duration must be fixed and certain.
Under 18s can’t:
Hold an interest in land
Can a borrower let a mortgages property
Yes they have the right unless the mortgage deed states otherwise. (Most mortgage lenders insert this deed)
The lender is or is not liable from loss made on execution on sale?
Is not
What rights do lenders have on insurance proceeds
The right to determine how insurance proceeds are used on the property
How can you extend the lease
If you’ve held lease for more than 2 years
Can buy a new lease running for 90 years from end of CURRENT lease
Landlord not able to refuse an application to extend, the cost to leaseholder must be “FAIR VALUE” based on open market values
What is legal and equitable owners
4 people can be registered as legal owners at the land registry. If more than four the others with a right to share are called equitable owners.
Equitable owners do not have the right to transfer property like legal owners.
The legal owners jointly hold the land in trust.
Leaseholders cannot buy the freehold if
It is a converted property with 4 flats or less
The same person has held the freehold since before the conversion and has lived in one of the flats as main residence in the past 12 months.
More than 25% of the building’s internal floor areas is for commercial use
If one person dies in tenancy in common what happens to the deceased’s share
It’s is held in trust by the heir by the owner until a joint legal owner is appointed and the property is sold, if appropriate.
How is tenancy in common set up?
A notice of severance is served on the other owners. The original notice or a certified copy of the notice is sent to the land registry along with a form A restriction request on the property. This form prevents the other owner from selling without agreement and shows up on conveyancing searches
Factors that affect freeholder rights?
Local authority conditions
Local and national planning legislation
Covenants or easements
Restrictions by earlier owner
Former public utilities eg, water company owns rainwater
Owner has obligations to those who enter or pass eg. A tile falling off the roof and injuring someone
Roughly how many years do lenders want lease to extend past the mortgage term?
30-40 years
What is commonhold
Commonhold is an alternative to the long leasehold system. It allows you to own the freehold of individual flats, houses and non-residential units in a building or on an estate. Unlike leasehold, there is no limit on how long you can own the property for. Registered with land registry.
The rest of the building or estate which forms the commonhold is owned and managed jointly by the flat owners (referred to as unit-holders) through a commonhold association.
There is an annual charge to unit holders to cover costs and a fund for repairs.
When are leaseholders not qualifying tenants wrt buying freehold.
Landlord is a charitable housing trust
Lease is for commercial property
Leaseholder owns qualifying lease of more than two flats in the building.
Since 2002 how long do you need to be in a lease to extend and how many years can you extend
2 years and extend by 90
What is the payment premium to the landlord when extending a lease based on:
Landlords financial loss
Reduction in financial interest
Element of increase in property value
Compensation for loss of ground rent
