Leasehold plot in Scotland

[Guest Alphonsox]

A friend has been offered a 99 year lease on a plot of land in Scotland by its English owner. I seem to remember that leasehold is a lot rarer in Scotland than England and may not even exist in the same way as it does in England.

Does anyone have experience of Leasehold under the Scottish Legal system or could point me at some information.

Thanks

[Jeremy Harris]

Sounds unusual to me.  Leasehold has never been common in Scotland at all, as historically few people owned land outright, and the Scottish form of freehold used to be pretty much restricted to land that used to belong to the church and the outright ownership of feudal landlords.  The law changed just after we moved back South to remove the old feudal land ownership system, something that was long overdue, as it was an anachronism. 

 

Before that almost all land was still under feudal tenure, with the land owner often being the local laird, who had various rights over "your" land and what you could do with it.  Both houses we owned in Scotland were under feudal tenure, but in both cases the feu duty had been paid in perpetuity, so there was no ongoing payment to the land owner.   Freehold is now referred to as outright ownership, and my understanding is that most leaseholds were converted to outright ownership a few years ago, when the Scottish Parliament introduced legislation forcing this (which is what has been putting pressure on Westminster to do the same).

 

My guess is that this a relatively new lease, set up by the current outright owner.  I doubt there will be much information around on Scottish leasehold under current legislation, as it's new, unusual and probably challenging to set up.  As Scottish land law is so very different to that elsewhere, and as it has changed very recently with regard to leaseholds, I think the best advice would be to find a good Scottish lawyer who has in-depth knowledge of the way that leaseholds can be structured.  My instinctive reaction is one of caution, as I know that the attitude towards any form of tenancy is not generally positive, for historical reasons.  I think I'd want to know why the owner wants to sell a lease, as on the face of it that seems unusual.

[Guest Alphonsox]

Thanks - that pretty much matches my current understanding of the situation. Just for clarity the landowner has very generously offered the lease to my friend for free to help solve his looming housing crisis ("If you can get planning on this bit of swamp I'Il let you a have 99 lease year for nothing"). Unfortunately both my friend and the land owner are English and seem to have expected English style property law to apply.

[ProDave]

Even the flat we used to own here was freehold. I suspect what they want, and what they can actually have, may not be the same.

[Guest Alphonsox]

5 minutes ago, ProDave said:

Even the flat we used to own here was freehold. I suspect what they want, and what they can actually have, may not be the same.

 

I think that's probably the case. Any idea what mechanism could be used in place of Leasehold in these conditions ? The landowner wants to maintain a long term interest in the land (part of his huge estate) but wants to help out my friend by providing him a "free" building plot. In England this would be done via leasehold, I can't see what the equivalent would be in Scotland.

[ProDave]

But even an English leasehold would give the leasee rights to extend it or buy the freehold.

 

What is he actually trying to achieve?

[Guest Alphonsox]

3 minutes ago, ProDave said:

But even an English leasehold would give the leasee rights to extend it or buy the freehold.

 

What is he actually trying to achieve?

 

Very true - What he is trying to achieve is

- To keep my friend as a permanent resident in the village once his current rental house reverts to being yet another holiday let.

- To maintain the long term integrity of his estate.

 

My friend wants to stay in the village and has the financing to buy a plot OR to build a low cost home, but not both. A "free" plot would solve this conundrum.

[Triassic]

Maybe he could rent the land, as an alternative to leasehold,   the rent could then be set at a peppercorn rent of say 10p per year, paid in advance. Keep the receipt!

[the_r_sole]

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Edited September 26, 2019 by the_r_sole

[Ferdinand]

Here be dragons imo.

 

Regardless of good intentions, IMO they need some good and experienced legal advice.

 

Long residential leaseholds in Scotland (iirc more than 175 years with 100 left to run) were converted to freehold, with the previous LL having certain compensation rights based on capitalisation of rent. This was about 3-4 years ago. Back in 2004 leases had been limited to 175 years.

 

Now I believe a commercial lease is limited to 175 years, and a residential lease to 20 years, under legislation from 1974 or so.

https://www.out-law.com/topics/property/investment-/conversion-of-long-leases-to-outright-ownership-in-scotland/

 

They need to know how their proposed agreement would work out under these new laws, and what terms would be imputed into the agreement .. I am not even sure whether such a lease is legally possible.Or it could come crashing down if their agreement is unenforcible.

 

A buyback or pay later agreement on the freehold may be the way, but I have no idea how that relates to land and rental law etc. The laws are new enough that the outfall may not be clear yet - I think they have common law, do they not, so it could evolve. In English property law it can take decades to knock the rough corners off whatever Parliament serves up in the higher courts.; sometimes they serve up a Dog’s Breakfast.

 

The intention of the Scottish government aiui was to abolish and make impossible long residential leases due to history of feudal tenure, political baggage etc. I have my concerns about the inflexibility of that, but it may just not be possible to do what you want.

 

Can they manage it like whatever the arrangements are for Tenements in Scottish cities?

 

Take advice.

 

Ferdinand

Edited October 2, 2018 by Ferdinand

[AliG]

As @Ferdinand says, you cannot sign a greater than 20 year lease on a residential property in Scotland.

 

Even if you could it would be so unusual as to render a house very difficult to sell/mortgage.

 

Frankly I think the entire system needs abolishing in England, but that is another matter.

 

The landowner could keep a percentage ownership in the property equivalent to the value of the land, so that your friend doesn't have to pay for the land and the landowner effectively owns it from a financial perspective.

 

However, I suspect that his real issue may be that he does not want the house sold to someone else in the long run and lose control over his estate. I suspect that he needs some kind of buyback clause to cover this, so that he can eventually buy the house at market value ex the original value of the land.

 

Of course this affects the value of the house also and would be off putting to future buyers, he might have to buy it back and then rent it out.

 

Ultimately this kind of deal annoys me as people want something for nothing and they get themselves all tied up to try and achieve something that isn't really feasible.

 

If the owner wants long term control of his estate then he should keep ownership of it. If a house can be built, he should build it and rent it out. I know he is trying to be nice, but what he suggests is actually a great deal for him. He doesn't have to get planning permission but would benefit from it in the increase in the value of his land. Then he wants it to revert to him on a 99 year lease. It would actually be an awful deal for your friend as he would be building a house that would depreciate in value. Luckily the Scottish legal system has protected him from this.

 

A buyback clause would be fairer but it would mean the landowner being on the hook for buying back the house eventually. I would be interested to see if he would go for this. Even then I do not know the legalities around it in Scotland.

 

 

[Ferdinand]

Further thought - shared ownership? What are the implications?

 

The landowner could keep say 15-20% of the house, plus a pre-emptive right to First Option to buy the 80% at unencumbered market valuation should the builder choose to sell - written so as to be in perpetuity.

 

Would that need to be applied both ways under Scottish Law?

 

Ferdinand

 

 

Edited October 2, 2018 by Ferdinand