Author: Roy Perrott
This piece first appeared in Estates Gazette on 25 June 2011 and was reproduced with the permission of the publishers of Estates Gazette, Reed Business Information.
Flying freeholds are a quirk of English land law, arising where one freehold property overhangs or projects under another. They can jeopardise development, prevent repairs and make a property difficult to fund. The existence of a flying freehold often emerges late in the day, when insurance is the only realistic, but unsatisfactory, solution.
The oddest element of flying freeholds is that they exist at all. It is a principle of English law that a landowner owns everything above and below it, but things are not that simple. In the 13th century, the courts acknowledged that one freehold could exist above or overhang another; eg medieval housing in York shows how common this was. By the 16th century, the concept had become settled in English law.
Today, no one would willingly create a flying freehold – a long lease can be granted instead – but they surface surprisingly often. Take, for example, historic town-centre buildings with basement vaults or archways through to a rear courtyard. Or urban houses built on steep hills, where one property partially sits on the one beneath.
Flying freeholds rarely benefit from adequate rights of support, protection and access. This is a significant problem when works are required.
If a building with a flying freehold is in need of repair and there is no legal right to erect scaffolding on the land beneath, an agreement must be reached with the neighbouring owner, possibly at ransom values. If the neighbour objects, it may be possible to obtain a court order under the Access to Neighbouring Land Act 1992, but only if the works are essential repairs; the Act does not apply to redevelopments.
Where the building on the other side of a flying freehold archway is in different ownership, the consent of that owner to any works may be needed. If that building is allowed to fall into disrepair it may threaten the structure of the arch and the safety of those who use it. This assumes that the owner of the land is known. If it is unregistered even that may not be clear.
Basement vaults present similar difficulties. Even if the works can be carried out from within the basement, the consent of the owner of the land above it is likely to be needed for works to the basement ceiling or for works that could affect the structure of the building above.
Thus, lenders are suspicious of flying freeholds. Some will not lend on any property with a flying freehold element or will consider it only on a case-by-case basis. Others will lend if the flying freehold does not exceed a set limit, often 15% of the total floor area of the building. Even if a lender is prepared to lend, there is no guarantee that a future lender will do so, rendering the property blighted to a degree.
Those willing to lend will invariably insist that the flying freehold has adequate rights of support and entry to carry out repairs. The lender’s lawyer will be asked to confirm that the property has good and marketable title. This is difficult to give with any confidence, leading to the need for a title indemnity policy to protect the lender against any loss suffered because of an inability to carry out repairs.
An indemnity policy is not a panacea. No one likes the idea of claiming under an insurance policy if they are unable to carry out repairs to their property, and there is no guarantee that the policy will cover the full extent of the insured’s loss. Moreover, it may be voided if an approach is made to the adjoining owner, thereby ruling out a long-term solution to the problem. The policy will almost certainly exclude structural alterations or a change of use, rendering it useless if the owner plans to redevelop. Post-planning cover, if available, is likely to be prohibitively expensive.
In effect, there is no solution, but it is necessary to be aware of the potential problems. Awareness provides an opportunity to tidy up the position before the property is marketed or redeveloped. Often, the seller is not aware of the existence of a flying freehold or the difficulties it will cause, particularly in this market where lenders are cautious. If it comes to light only during the buyer’s solicitor’s due diligence, it is frequently too late.
Surveyors also need to be alert. A site inspection is often the only way of discovering a flying freehold. A Goad plan is unlikely to help and the Land Registry title plan may not be conclusive. If a flying freehold does exist, the property must have adequate rights of support and access that are properly documented and registered as easements at the Registry. Moreover, rights of access and support will usually contain positive obligations to, for example, keep the land above or below in good repair. These obligations do not automatically pass with the land, so that each time the land is sold, the new owner should agree to comply with them. This is often overlooked, with the result that the new owner takes free of the obligation.
A flying freehold can, however, be a valuable commodity. The owner of a flying freehold basement may achieve a value exceeding its market value if the landowner above wants to redevelop. This can also work the other way round. In a recent development, a party owned the airspace above an adjoining site, which it was able to sell to the subjacent landowner. This enabled the latter to release part of its land, which was crucial for the redevelopment.
It is easy to miss the warning signs. When an issue does come to light, it is often too late and the transaction may founder. It is better to be aware of the issues and, if time allows, to regularise the position with the adjoining landowner by arranging satisfactory rights of support and access.
Roy Perrott, Professional Support Lawyer (firstname.lastname@example.org)