Lease plans legal problems
In business we are frequently and correctly often advised to always have a Plan B in place. In many situations, that’s plain common sense.
However, when it comes to property transactions, doing things the right way always make sense, notwithstanding this can lead to a degree of frustration where parties to a transaction generally demand that their lawyers proceed as fast as possible to exchange and completion, which as a property lawyer I fully understand and is my main objective also.
You may have already guessed that this post in really about physical plans in property transactions, and these are a classic area where unforeseen problems arise.
Boundaries and lease plans
Many sellers and buyers simply do not realise the importance and difficulties associated with physical plans for property. Common problems which arise are :-
1. the Land Registry title plan is approximate only, drawn to a designated scale, and may not accurately designate boundaries or other physical features of land or buildings
2. lease plans are often problematic (see further below)
If the boundary is unclear or lease plan out of date can or should a buyer still go ahead?
Many property buyers, especially first time buyers or someone starting a new business with new business premises, keen to get a shop or office lease concluded fast to get going, may say to his, her or their lawyer that any possible issues on a plan are not that important. However, it should be remembered that many property transactions are largely funded by mortgages or bank funding and the buyer’s solicitor will also generally act for the lender and have duties to that lender. The solicitor must do a thorough job for both buyer and lender and views and criteria to issues or risk may well not be the same for a buyer and lender.
Secondly, even if a buyer can proceed without external finance, a problem with a plan, if overlooked on purchase, is likely to reappear on sale, holding up the next transaction or, even worse, resulting in a subsequent buyer pulling out completely from a future transaction.
Land Registry Plans
Whilst the Land Registry system is designed to be conclusive, so that a buyer has certainty and where an error is on the Land Registry title, an owner has redress against the Land Registry, this comfort is primarily designed for errors relating to registered owner, charges against the property and not the Land Registry plan. When a property was first registered at the Land Registry, old deeds will have been relied and plans which were included in those old documents may not have been as accurate as is possible today. It is therefore important that a buyer always attempts to check the Land Registry plan against the land or property by an extra physical visit to the property, which may also identify changes such as extensions to the property or discrepancies in boundary lines which may not appear on the Land Registry plan.
Lease plans are vital for both residential and commercial leases and should be checked carefully by the buyer or tenant’s solicitors.
With residential leases,often a buyer is buying a lease which was prepared decades previously, and the lease plan may not be appropriate or compliant with current lender requirements. Checking the lease plan may also disclose changes to an internal layout of a flat which may or may not have been lawfully undertaken, either in terms of Buildings Regulations or which may have required freeholder consent. If changes have been made without consent, retrospective consent may be required or indemnity insurance and a deed of variation for the lease may be needed, with a new and up-to-date lease plan. Whilst such issues may slow down a transaction or even cause greater problems, if not spotted on purchase, problems are likely to arise on later sale. The same issues apply with commercial leases.
When a new lease is being granted, a lease plan should again be carefully checked and should in many cases be submitted to the Land Registry for pre-approval, as otherwise, when a buyer or tenant comes to register ownership at the Land registry this could be rejected.
In summary, property plans are a vital part of the checks made by good conveyancing solicitors on every transaction. It may be tempting, either as buyer, seller, lessor or lessee, to try and convince your lawyer that any issues are not as troublesome as he or she thinks but in reality, thinking that “Plan B” will suffice at a later stage is a recipe for trouble or even disaster.
Get in touch with me for advice on any aspect of property law or if you need a conveyancing solicitor. Darlingtons are accredited by the Law society under the coveted Conveyancing Quality Scheme, so you can be assured that we know what we are doing and offer excellent service also.
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