When it comes to boundary issues, your first thought may well be in relation to boundary markers at ground level. These could take the form of a fence, wall or hedge, for example. It is not uncommon to read newspaper articles about boundary disputes, sometimes involving very small measurements, escalating in disproportionate awards in costs. However, what if the boundary in question is above or below ground level?
Examples of such scenarios are as follows:
- in a row of terraced houses where all or part of a room at first floor level or above is situated above a passageway;
- in a larger building split into multiple units where part of one unit protrudes over another;
- a balcony that extends over a neighbouring property;
- a cellar/basement that protrudes beneath a property above it.
What is a flying or creeping freehold?
The property that extends above another is known as a “flying freehold”. The part below is a “creeping freehold”.
What do I need to consider when purchasing a property with an element of flying or creeping freehold?
It is important to seek advice when considering purchasing a property subject to, or with the benefit of, a flying or creeping freehold at an early stage.
Issues to consider are:
- the current state of repair and condition of the property and what repairs and maintenance are likely to be required;
- who is responsible for repairs and maintenance of the element of flying or creeping freehold?
- are the owners of the respective flying and creeping freeholds both required to contribute towards the cost or repairs, and if so, in what proportions?
- are there sufficient rights of access to enable the party responsible for carrying out the repairs to do so?
- what are the purchaser’s future plans? Are these likely to interfere with the flying or creeping freehold?
The answers to some of these questions may be found in the title documents but this is not always the case.
What measures can I take to protect my position as the potential owner of a flying or creeping freehold?
If a review of the property title concludes that there are insufficient provisions in place to give the purchaser comfort or satisfy the lender’s requirements all may not be lost. The following avenues could be pursued:
- Indemnity insurance – this does not create mutual obligations for repair, costs contributions or access rights where none already exist. Instead, the policy is designed to cover any costs and expenses directly related to the flying freehold and so may not be the ideal solution. There is also a risk that if the property is subsequently altered or redeveloped such insurance could be invalidated.
- The introduction of a leasehold ownership structure where the landlord has responsibility for repairing the structure of the building in question (and therefore the element of flying and creeping freehold) and the tenants (ie the owners of the flying and creeping freehold elements) covenant to reimburse the landlord for the cost. Where a property is already well-established with existing freehold interests it will be difficult to introduce a new ownership structure, particularly if existing freehold interests are mortgaged. Tax implications would also need to be considered. This suggestion will be most appropriate where a property is newly built, or an existing building has been re-developed, and units are being sold off for the first time.
- Entering into an agreement with the owner of the relevant flying or creeping freehold elements to set out responsibilities for repairs, maintenance, cost and access. Even if such a document can be negotiated it will not automatically bind subsequent owners as the agreement will be based on positive covenants. Positive covenants do not automatically bind subsequent owners. Such an agreement would therefore need to be protected by the entry of a restriction on the respective titles.
A potential purchaser of a flying or creeping freehold should also be aware that some mortgage lenders will not lend against a flying freehold. Other lenders will lend but have strict requirements, for example that the area of the flying freehold only comprises a small percentage of the property. It is almost certain that any lender will require the comfort of indemnity insurance. If you are planning on using a property with an element of flying or creeping freehold as security for a mortgage you should find out the lender’s requirements as earliest opportunity.
The lack of any clear and binding agreement regulating the rights and obligations that a flying freehold owner owes to the creeping freehold owner and vice versa has the potential to cause difficulty. It is important that a potential owner appreciates this. The key is to seek professional advice at an early stage to review the title deeds and advise you of any existing rights and obligations and how they affect the property. If you own, or are considering purchasing, a property that includes an element of flying or creeping freehold and require advice please contact a member of our Commercial Property team.