In this edition of her blog, solicitors negligence specialist Emma Slade looks at another conveyancing negligence case that has landed on her desk; a commercial one this time.
My client (who I shall call Mr Cook) is a property developer and when a small property came on the market, he took some interest in it. It was an old house which had seen better days but which had received planning permission to convert into offices. The details from the Estate Agent pointed out that the property had a very large rear garden which would be suitable for the parking of 6 cars. The sale would be of the leasehold only.
Mr Cook had had dealings with his firm of solicitors for a number of years and they had dealt with virtually all his property purchases. He asked them to oversee the purchase of this property.
The solicitor called for a copy of the Land Registry Office Copy Entries for the property. For those not in the know, OCE’s are an official document prepared by the Land Registry that contains all the relevant legal details about the property – title owners, title, extent of property, covenants, charges etc.
The OCEs arrived and it confirmed that the title to be purchased was a lease currently held in the name of the vendor who I shall call Mrs Aiken. The OCEs were also obtained for the freehold which showed that the freeholder was a Mr Aiken – Mrs Aiken’s husband. Mr Cook was very interested in the opportunity and so discussions were held with Mr & Mrs Aiken where it was agreed that both the lease and the freehold would be sold to Mr Cook.
The transaction went through but as soon as the details of the purchase were sent to the Land Registry for noting on the register, the Land Registry wrote back and asked what Mr Cook was going to do about the headlease.
“What headlease?” wrote back his solicitors. “Mr Cook has bought it.”
“No,” said the LR, “he has bought the underlease which is for the house only. It doesn’t include the garden” (or words to that effect).
On further inspection, it turned out that Mr Aiken had owned the freehold of the house. His neighbours – a dentist’s surgery – had thought the garden would be of considerable use to their business. Not wishing to part with it, a complicated scheme was set up whereby Mr Aiken gave a lease (the headlease) of the entire property to the dentist’s surgery who in turn gave a lease back (the underlease) of the house to Mrs Aiken.
Why not lease back to Mr Aiken you may ask or even just lease the garden? Simple. In certain circumstances, a lessee may ‘enfranchise’ his lease, ie buy out the freeholder which would expunge any intervening leases. However, he cannot do that if the freeholder and the lessee are one and the same. By doing it this way, at any stage, Mrs Aiken could have enfranchised her lease, chopping the dentist’s surgery out of the picture. A complicated transaction but it prevented the dentist’s surgery from enfranchising themselves and it therefore kept the property in the Aiken family.
The Aiken’s had been a bit disingenuous therefore when they sold the property to Mr Cook as they would have known of the headlease but at the same time, Mr Cook’s solicitors should have spotted this. On the OCE’s, it clearly made reference to the headlease – the solicitors simply hadn’t checked the details against the underlease, just presumed they were one and the same.
Mr Cook was at a loss as to what to do. Because of restrictions in the lease, he could not raze and develop the house as he had wanted. He didn’t have the garden so would not have the planned-for parking area even if he could have rebuilt. Unlike Mr & Mrs Aiken, as he held both the underlease and the freehold, he could not enfranchise to get rid of the intervening lease.
To mitigate his loss and to get rid of this pup, he negotiated with the dentist’s surgery and he sold the property to them. They are now developing it. However, Mr Cook had to sell the property at a lower price than what he bought it for; the dentists knew of Mr Cook’s difficulties.
And so we are now bringing a professional negligence claim against the conveyancing solicitor for missing a critical title number and not checking the details properly. Needless to say, Mr Cook no longer uses them to deal with his other property purchases!
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