Good Leasehold Title versus Absolute
- A good leasehold is not as good as an absolute title.
- The lease is valid on a good leasehold title, but the Land Registry is not satisfied regarding the freehold.
- A good leasehold may arise, for example, where the freehold is unregistered or the freeholder cannot be identified.
- If someone else can claim the freehold, this would mean the person who granted the original lease had no right to do so.
- Some lenders will still grant a mortgage on a good leasehold if you get indemnity insurance.
- Depending on the circumstances, it may be possible to upgrade the title to absolute.
What is the difference between good leasehold and title absolute?
In both absolute and good leasehold titles, the authenticity of the leasehold is not in question. In an absolute title, the authenticity of the freehold is also satisfactory. The issue with good leasehold title is that the Land Registry are not entirely satisfied that the freeholder who granted the good leasehold title is the true freeholder.
When might the freeholder not be the freeholder?
In most cases, the freeholder is the freeholder; they simply haven't registered the title at the Land Registry, they only hold a possessory title over the freehold, or they can't be identified. This may be the case on long leases, where the original freeholder has passed away, and the freehold has changed hands.
What is the issue with a good leasehold title?
The risk to the good leaseholder is that the freehold ownership could be challenged. A third party could turn up, presenting the original paperwork and purchase documents, to register themselves as the rightful freeholder.
If the 'freeholder' who granted your lease did not have the right to do so, this could make your lease invalid. You'll usually get to keep the leasehold, but you'll have to pay the real freeholder for it.
You could also discover there are restrictions or covenants on the property of which you were not aware; if you have unknowingly breached any of these, you may be liable to rectify the breach or compensate the freeholder.
Can I sell a good leasehold title?
A good leasehold is harder to sell, but it is still possible as long as there is no existing challenge or claim over the freehold. Expect to receive less than you would for an equivalent absolute leasehold, and get insurance through your conveyancing solicitor if you don't have it already.
If the freehold is being challenged, it is unlikely you'll be able to sell the leasehold interest until the matter is resolved unless you can find a cash buyer who is willing to take a gamble.
Do lenders accept good leasehold titles?
There are a few lenders who will not accept good leaseholds. Most lenders will accept a good leasehold if you can satisfy the lender of the freeholder's title (hard to do if the freeholder has been unable to satisfy the Land Registry) or, most commonly, if you have adequate indemnity insurance.
Our brokers will present the best options available to you, for any type of mortgage, including:
- First-time buyers, home movers and buy-to-lets;
- Employed; self-employed or director mortages;
- Mortgages for non-UK residents or non-UK citizens;
- Bridging loans;
- Bad credit mortgages;
- Guarantor mortgages;
- Joint borrower, sole proprietor mortgages; and
- Absolute, Possessory, Good, or Qualified Title.
Good leasehold title indemnity insurance
Indemnity insurance protects you (and your lender) against:
- Losses, including damages and compensation awarded against you;
- Adverse difference in market value;
- Cost of court-ordered works;
- Cost of settling out of court (as agreed with insurer); and
- Other related costs and expenses.
Your conveyancing solicitor will arrange the insurance and make you aware of the terms and implications of your policy.
You cannot get good leasehold title indemnity insurance if there is already a challenge to the freehold. If the freehold is already being challenged, you won't be able to get a mortgage on the leasehold; even if you're buying with cash, it's probably not worth the risk, better to cut your losses and pull out of the purchase.
Upgrading good to absolute leasehold
You can only upgrade the good title to absolute leasehold if you can provide the Land Registry with the landlord's title, and if they are not the freeholder, the title to any other head leases up to and including the freeholder's absolute title.
If the freeholder has a possessory title, they may be able to upgrade it to absolute. In this case, you should be able to use this to upgrade your good title to absolute leasehold as well.
Should I buy a good leasehold title?
If you can get indemnity insurance and a mortgage, you can still buy a good leasehold, but you do risk the stress of having to deal with a potential claim for the freehold from a third party.
Make sure you choose an experienced conveyancing solicitor who will make a full appraisal of the title and make you fully aware of the risks and implications of taking on the property so you can make a well-informed and balanced decision.
- Expert panel of conveyancing solicitors, with local knowledge.
- Your transaction is protected by our No Sale, No Fee policy. Terms apply.
- Fixed fee conveyancing.
- We are on 99% of mortgage lender panels.
- We can solve any property challenge.
Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
