Asset Management Q&A - What is a flying freehold?
Question: We are buying a property, part of which has been described as a “flying freehold”. What is a flying freehold, and what problems can arise from it?
Flying freeholds are an oddity of English land law, which fill many property lawyers and prospective purchasers with dread. If a flying freehold wings its way into a transaction, it may require some careful consideration, but it need not mean that the deal will crash and burn.
A flying freehold arises when part of a property extends above or below the demise of a neighbouring property. The owner of the flying freehold will not own the land or structure vertically above or below their property, which is what creates the “flying” element. Common examples include a balcony or bay window which overhangs a pavement or courtyard, or a row of terraced houses which slope and are not capable of being divided vertically. Despite conjuring an image of a floating building, flying freeholds need not always “fly” and can come to light, for example, when vaults or cellars extend below the surface of an adjoining property.
The main issues presented by a flying freehold stem from a lack of clarity over reciprocal rights between adjoining owners, particularly when it comes to who is responsible for the repair and general upkeep of commonly used structures or parts, and how the costs of such repair and upkeep are to be allocated. In the absence of clearly defined rights, it is worth considering the following potential options:
- Deed of covenant – You could approach your neighbour, suggesting that you each enter into a mutual deed of covenant, which grants rights of access and support, and sets out repairing and maintenance obligations. The deed should also bind successors in title so that if you or your neighbour sell, you will have the comfort of knowing that the reciprocal rights and obligations will be upheld by either your successor or your neighbour’s successor going forward.
- Maintain a friendly relationship – You could seek a less formal agreement with your neighbour and choose to discuss repairs and access as and when needed. Whilst this is potentially a cheaper and friendlier approach at the outset, problems can arise if the relationship sours, or if the same agreement cannot be reached with your neighbour’s successor.
- Access to Neighbouring Land Act 1992 (the “1992 Act”) – If your neighbour refuses to grant you access to their land, you may be able to rely on the 1992 Act for the purpose of carrying out “basic preservation works”. Such works can include maintenance, repair and/or renewal works which, without the grant of access to the neighbouring property, would be incredibly difficult or impossible to carry out. In order to pursue this option, you will need to bring proceedings in the county court where, if successful, you will be granted an access order setting out the permitted works and when and where they can be carried out. You may also be required to compensate your neighbour for any loss suffered as a result. The court will, however, refuse to grant the order if the works are considered to bring hardship on your neighbour.
- Insurance – Flying freehold indemnity insurance may be available to cover a lack of repairing obligations. Insurance could also be the appropriate option if you cannot identify the owner of a flying freehold. Scenarios can arise where a flying freehold is unregistered or, where a flying freehold has inadvertently passed bona vacantia (i.e. it is ownerless property, to which title has passed back to the Crown). Not every insurer will offer this cover however and, as with any insurance policy, it is worth checking with more than one provider what terms they are prepared to offer you and at what level of premium.
You should also be aware that approaching a neighbour or third party and putting them on notice of any potential risk covered by the insurance could invalidate the policy. If you can identify your neighbour and want to try and discuss matters directly, you may prefer to choose the deed of covenant approach rather than opt for indemnity insurance.
- Purchasing the adjoining property – Depending on the nature of the property and the extent of the flying freehold, you could seek to purchase the property over which the flying freehold hangs. This is of course not the most economical option, but it would prove a definitive solution.
Finally, whilst flying freeholds can prove a turbulent issue, transactions need not be diverted. Both lawyers and prospective purchasers need to be aware of the potential problems, and consider the appropriate way to deal with this land law quirk. If you are looking to mortgage the property, you may also need to consider the approach taken by your prospective lender. Whilst the presence of a flying freehold can be an insurmountable problem for some banks, others will typically look at the proportion of the property which constitutes a flying freehold (i.e. ideally less than 15 - 25%), and want evidence of either bespoke indemnity insurance or mutually enforceable repairing covenants in order to get comfortable with lending against the property.
Jade is an associate in our Commercial Real Estate team.