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Leasehold affected by charging order on freehold?

Leasehold affected by charging order on freehold?

Postby Lorimer » Wed Aug 02, 2017 6:56 pm

We have just completed a lease extension on our flat using the formal route (Section 42)*. The lease extension has now been registered with Land Registry. We were aware that there was an interim charging order on the freehold title before we commenced our lease extension but our solicitor advised us that this would not affect us.** Now that our lease extension has been completed and registered with Land Registry, a rather worrying notice has appeared on our leasehold title:

A: Property Register
(24.07.2017) The title to the lease is, during the subsistence of the charge dated 19 January 2016 in favour of X affecting the landlord's title (and, to the extent permitted by law, any charge replacing or varying this charge or any further charge in respect of all or part of the sum secured by this charge), subject to any rights that may have arisen by reason of the absence of chargee's consent, unless the lease is authorised by section 99 of the Law of Property Act 1925.


Should we be worried about the Land Registry notice on our leasehold title? It sounds pretty scary and we are worried that its existence could put off any prospective purchaser of our flat.

* Our lease extension cost us 11K plus fees
** The beneficiary of the charging order is a former leaseholder whom we understand managed to get a CCJ against our freeholder. We have been told that the amount of the judgement is c.100K
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Re: Leasehold affected by charging order on freehold?

Postby dls » Thu Aug 03, 2017 8:01 am

The entry does not say that any rights exist. What is says is that if (and only if) you should have got the chargee's consent then, to the extent that that gives the chargee any rights to object those rights continue to be effective.

It is a very technical question and any answers may depend on the paperwork. It may be fine, or it may not. You are right to ask the question, and you should make sure you have a proper answer, but do not assume that the answer will be bad.

If you exercised a statutory right to an extension then very possibly the chargee's consent was not required.

Now is the time to sort it - not when you come to sell.
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Re: Leasehold affected by charging order on freehold?

Postby theycantdothat » Thu Aug 03, 2017 9:08 am

dls wrote:Now is the time to sort it - not when you come to sell.


Absolutely! This is down to your solicitor to sort out at his own expense. You paid him to acquire a good and marketable title. That is not what you have because the "rights that may have arisen by reason of the absence of chargee's consent" are unknown and could include the right to sell the freehold free from your lease. You are right to worry that you may have a problem on a sale, because no competent conveyancer will allow his client to buy with that notice on the register, or at the very least requiring confrmation of what the rights are.
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Re: Leasehold affected by charging order on freehold?

Postby atticus » Thu Aug 03, 2017 11:50 am

Shall we now count the assumptions in that last post?
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Re: Leasehold affected by charging order on freehold?

Postby theycantdothat » Thu Aug 03, 2017 5:51 pm

It assumes that the solicitor's terms of engagement did not include a provision that he was under no obligation to ensure a good and marketable title.

It assumes that the solicitor did not ask for the chargee's consent, was told it would not be forthcoming, advised against proceeding but the OP decided to proceed anyway. This is a reasonable assumption because the OP says: "Our solicitor advised us that this would not affect us."

It expressly assumes that any buyer will be represented by a competent conveyancer. Any competent conveyancer will regard the entry as a defect of title.

It assumes that the Land Registry did not make the entry in error. Even if it did, it is the solcitor's duty to point out the error.

Two separate questions can be asked here:

Is the OP at risk of losing the property?

No answer can be given without knowing all the facts. On balance probably not. Subject to complying with section 99 of the Law of Property Act 1925, an owner of property subject to a charge can grant a lease unless the terms of the charge prohibit it. The charge is a charging order and I have never heard of a charging order prohibiting the grant of tenancies without the consent of the chargee, though technically it is possible.

Will there be a problem on a sale?

Yes, if the buyer's conveyancer is on the ball. He has to take the entry as he sees it. It flags up the possibility that the chargee has rights. If the entry is not removed, the conveyancer needs to be satisfied that there are no rights which affect the leasehold interest. Even if unlikely, the possibility that the chargee can sell the freehold as mortgagee free from the lease needs to be ruled out. The problem needs to be sorted out now and not on a sale.

I am not suggesting that the solicitor is incompetent, just that he slipped up by failing to allow for the possibility of the LR making the entry they have.

If the LR were right to make the entry on what grounds can the solicitor avoid responsibility for getting the entry removed?
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Re: Leasehold affected by charging order on freehold?

Postby atticus » Thu Aug 03, 2017 6:00 pm

First assumption - that a solicitor was engaged.
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Re: Leasehold affected by charging order on freehold?

Postby theycantdothat » Thu Aug 03, 2017 7:15 pm

Lorimer wrote:...our solicitor advised us...
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Re: Leasehold affected by charging order on freehold?

Postby atticus » Fri Aug 04, 2017 5:54 am

apologies - I missed that.
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Re: Leasehold affected by charging order on freehold?

Postby dls » Fri Aug 04, 2017 7:56 am

It is not that the solicitor has been negligent, but just that, as TCDT says, the OP needs to know. The powers of the chargee may be clearly set out and demonstrably of no significance. However, that needs to be demonstrated.
I suspect that is a matter of establishing the terms of a standard court imposed charge
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Re: Leasehold affected by charging order on freehold?

Postby atticus » Fri Aug 04, 2017 1:39 pm

The terms of a standard charging order will not prohibit grant of a lease without the consent of the chargeholder. A copy of the order can be obtained from the land registry.

I am sure the OP, if she returns, will explain what her solicitor has said.
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