Lease enlargement: An ntitle case study

In the first of a series of case studies on unusual titles by title investigation outsourcing service ntitle, we will be discussing the concept of lease enlargement.

What is lease enlargement?

The concept of lease enlargement allows a tenant with a long lease satisfying various conditions to transform their leasehold interest into a freehold interest. The conditions are difficult to satisfy but if they can be satisfied, the tenant will be able to enter into a unilateral Deed to become the freeholder.

What is the criteria?

For leases to be capable of being enlarged they must satisfy all of the following conditions:

  • The lease was originally granted for over 300 years
  • There are over 200 years left unexpired
  • No ground rent is chargeable
  • The landlord has no right to forfeit for breach of any of the tenant’s covenants

Land Registry position as to the procedure

In the past, due to most land being unregistered and the enlargement Deed not triggering compulsory registration, it was difficult to ascertain when enlargement had taken place.

Until recently, the Land Registry closed down the tenant’s leasehold title, as well as the landlord’s freehold title, and replaced this with the new freehold title in the name of the tenant.

The Land Registry has updated their procedure and will now keep the existing freehold register open (which will mean two freehold titles are open) and they will make a note on the schedule of leases in relation to the enlargement. Each freehold title will refer to the other in the notes, but this can cause confusion over which is the current freehold title.

Complications involved with the title investigation

Lease enlargement creates an additional concern for purchasers if the freehold is being purchased as any new buyer will need to clarify which freehold title they are purchasing.

In a recent ntitle title investigation, the lease was missing. Unable to confirm that the enlargement satisfies all conditions as set out above, the Land Registry included a restriction on the title stating that it is subject to the lease. In the future, should the lease be located and it is discovered that it does not satisfy all requirements, then the freehold title could be challenged and beaten. Indemnity insurance can be put in place to protect in this situation.

Entries in the Register

The following are examples of entries that may be found on the Register:

  • The Freehold estate in the land in this title was formerly Leasehold held with other land under a Lease of which the date and parties are unknown for a term of 999 years from an unknown date
  • By a Deed dated *** An individual purported to enlarge the term referred to above into a fee simple, but as neither the Lease nor a certified copy or examined abstract thereof was produced on first registration it is uncertain whether the said term was capable of being so enlarged. So far, as there has not been an effective enlargement all estates, rights, and interests subsisting or capable of arising under the Lease, they are excepted from the effect of registration and the land is in any event subject to the provisions of Section 153(8) of the Law of Property Act 1925

How did we explain this to the purchaser?

We included the following explanation in the Report on Title:

The freehold title has been “enlarged”. This means that it was formerly a leasehold title but by satisfying various conditions, and a by a Deed dated the 7th November 1996, the leasehold was transformed into a freehold. The original lease was not produced to the Land Registry upon first registration and therefore the Land Registry has stated that it is uncertain whether this “enlargement” has been effective. The title is subject to the provisions of Section 153(8) of the Law of Property Act which means it includes the same trusts, powers, rights, covenants, and provisions relating to use and enjoyment, and to all the same obligations as the lease term would have been subject to if it had not been enlarged.

What enquiries did we raise?

The following enquiries were raised for this specific title investigation:

  1. We note the “enlarged” freehold title but please confirm whether the original freehold title is registered with HM Land Registry.
  2. Please confirm that an allowance can be made on completion for a suitable indemnity policy in respect of the entry at ***

How did we make the Conveyancer aware?

We provided an explanation of the enlargement in the Title Snapshot. The Title Snapshot is a document which highlights any important aspects of the title which the Conveyancer will need to be made aware of. This ensures the Conveyancer can give the issue the attention it requires once the replies to enquiries are received.

This article was submitted to be published by ntitle as part of their advertising agreement with Today’s Conveyancer. The views expressed in this article are those of the submitter and not those of Today’s Conveyancer.

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