Tyneside Lease – What Is It And How Is It Different To Standard Leasehold Properties?

The Tyneside Lease was originally granted to flat owners in the late 1800s to accommodate a growing work force in the North East of England. These were (and continue to be seen) in areas particularly around Sunderland, Newcastle, and Gateshead. Since its inception, Tyneside Leases have been adopted to use in other part’s of the Country too, where a maisonette maybe converted to two flats.

We will look in detail now as to what Tyneside Leases are, how they operate, what are the considerations for a mortgage lender and also, if a Tyneside Lease suitability for a residential development scheme.

What is a Tyneside Lease?

In it’s simplest form of explanation, a Tyneside Lease Scheme (the Scheme) is one where the owner of one flat/apartment is the landlord for the other. This is the reason why Tyneside leases are interchangeably known as criss-cross scheme or crossover lease arrangements. It is more common to find a development arranged in this manner where there are only two flats in question. Each flat will have independent entrance and exit points and in some cases, the use of an exclusive area of the Garden (one flat may have use of the front garden whilst the rear is for use by the other).  There are instances where there are three flats in a development arranged in this manner, however it is common for these arrangements to be termed a share of a freehold property (as having more than two freehold interests for a single property is complex enough).

By being the Leaseholder of such an arrangement, each tenant is able to enforce covenants against the other, without the need to first approaching an entity who plays the role of Landlord as you would otherwise find in a traditional Leasehold/freehold relationship. The tenant in the upper flat can force the tenant on the ground floor to repair and the foundations to the property and vice versa, the roof. The technical position which gives rise to this right is known as privity of estate. Privity of Estate is where more than one party has a shared interest in the same property.

A Tyneside arrangement therefore works on the basis whenever there is a sale of a property involving such a Lease, the freehold interest for the other flat is also transferred to the buyer of the leasehold interest simultaneously. Equally, when there is a mortgage/lender involved, the lender’s interest must similarly be registered against the freehold interest.

To ensure that the scheme does not fail, a good lease will contain covenants to prevent one being transferred without the other. This should be further secured by registering these covenants in the form of restrictions at the land registry.

How Tyneside Leases Can Affect You As A Buyer Or Seller Of Property

How Tyneside leases affect you as a party in a transaction depends on your individual circumstances. It would therefore be easier to look at some considerations outlining the various advantages and disadvantages of the scheme are.

Looking at advantages first, one of the common instances as to why a Property Developer may consider this type of scheme (even now) is where they do not wish to  hold any interest in an estate once they have sold all the flats. As explained earlier in this article, this option may be sensible if you are a small builder/private investor. By assembling the site in this manner, the builder will have no continuing obligation to act as the Landlord and carry out matters such as managing development once the flats have been sold.

Another instance when such an arrangement would be attractive to a builder is primarily from a perception perspective. Due to increased reservations about having to rely on Landlords and their practices, such a property might be more appealing to some purchasers.

Looking at drawbacks, the most common issue with this type of scheme for a conveyancer is that it is a complicated scheme to setup and there are a lot of pitfalls which must be avoided. Where purchasers are concerned, and especially those who are reliant on mortgage finance, not all lenders are happy to lend against Tyneside Leases. This is primarily as a result of questions over maintenance of joint services over maintenance of joint services and communal parts.

It is also worth noting that, since each property has a corresponding number of freehold interests/titles, this causes confusion and also may bring to light issues that you would otherwise find with flying freeholds.

A Practical Example Of When A Tyneside Lease Goes Wrong

In recent years, we have seen a growing number of instances purchasers acquiring the entire building with all leasehold interests in it. They then convert the various flats back to be used as a single dwelling.

There have been a number of cases where it has been revealed during the conveyancing process that one or more freehold titles accompanying some leases haven’t been transferred to the purchaser.

Unlike a traditional building, this creates issues to the purchaser where this leaves the buyer unable to register the freehold interest at the Land Registry as it is effectively not complete.

In most cases, these issues can be rectified relatively easily by approaching the previous solicitor/their solicitor to arrange for the relevant freehold to be transferred to the purchase at a later date. This however would naturally require additional conveyancing costs which most likely have to be borne by the purchaser.

Conclusion

There is nothing inherently wrong with a Tyneside lease and far more properties involving such a scheme changes hands regularly than you would think. That said and as we have touched upon, this is a complex setup and it is crucial your conveyancer is an expert in this type of lease arrangement.

Additionally, if you are considering purchasing a property affected by this scheme, it may be sensible that you inform your mortgage lender or financial advisor as soon as possible so relevant disclosures may be made to the lender. This will ensure a smoother conveyancing and mortgage application process over one where you have already incurred significant costs on arranging a facility, which is later rejected by a lender.