Share of freehold (or not)

John_V85

Hello

It appears from my solicitor that a flat I am in the purchase of buying (haven't exchanged yet, but have mortgage offer, etc.) will not give me a share of the freehold, despite it being advertised as such on the EA's website and in the HIP. It is also an assumption used by the surveyor in the homebuyers report.

My question is: what actual effect would this have on me? Is it likely to be a good or bad thing? Should it effect the price?

Thanks in advance

John

princeofpounds

It is potentially very significant. How significant will depend on the specific situation.

Potentially it would mean that you don't have a vote on managing the whole building (which your lease probably allows you to be charged for).

It will affect price, although the longer and the better the terms of your lease the less it will affect pricing.

You can visit the website or call LEASE, which is a govt-funded advice service to explain freeholds and leaseholds, and I also recommend you visit landlordzone's long leasehold forum where there are a few experts who can help you.

Richard_Webster

Can we ask why they thought it would give you a share of freehold and why it is now discovered it won't?

John_V85

I'm not sure at this point.

All I know is that the advert and HIP advertised a share of freehold, but the solicitor has come back and said I won't get that. I wonder if the relevant document, whatever that may be, has been misplaced or not passed on. It seems like a rather big error to get wrong.

Richard_Webster

If this is a conversion and there are up to 4 flats then the freehold may have been been purchased at some point by the flat lessees collectively and their individual names were put on the freehold title - say they are ABCD.

If D defaults on his mortgage and has his flat repossessed he will presumably have disappeared and no longer be interested in the flat.

If OP is buying flat from A then the freehold should be transferred by ABCD to ABC and OP, but D's signature is needed so it can't easily be done. Freehold goes into a kind of limbo.

That is a possible explanation and it is cautionary tale for anyone buying a literal shared freehold. If the freehold is owned through a company you do not have that problem because the ownership of the freehold doesn't change when a flat changes hands - it stays with the company.

I'd be interested to see if this ties up with what the solicitor explains to OP.

Fire_Fox

Richard_Webster wrote: »

If D defaults on his mortgage and has his flat repossessed he will presumably have disappeared and no longer be interested in the flat.

If OP is buying flat from A then the freehold should be transferred by ABCD to ABC and OP, but D's signature is needed so it can't easily be done. Freehold goes into a kind of limbo.

Interesting. Is it possible to go to an LVT? I know there are some cases that can be brought with an absentee freeholder but not sure on transfer of title.

John_V85

Thanks for the replies. If the freehold is owned through a company (HIP may suggest this) then what is the mechanism for change of interest?

Fire_Fox

"Compulsory Acquisition Order
Where a landlord is in breach of an obligation under the terms of the lease and it is likely to continue, or where a building has been subject to the appointment of a manager pursuant to Section 24 of the Landlord and Tenant Act 1987, the qualifying tenants may make application to the High Court or county court for an Acquisition Order to acquire the landlord's interest. Where the application is based on a manager having been appointed under Section 24, the manager must have been appointed for no less than two years on the date of application to the court.

A Preliminary Notice must be served on the landlord by the tenants before an application can be made to the court, unless the court agrees to dispense with the notice. The court's Order for Acquisition is subject to conditions that, amongst other things, there are two or more flats, that at least two-thirds of the flats in the building are held by qualifying tenants, and that the requisite majority of qualifying tenants make the application. Further advice should be sought before this option is pursued, as there are exceptions.

If the Order is made by the court, the LVT will determine the terms on which the landlord's interest may be acquired (including the purchase price) unless they have been agreed between the parties involved. "
http://www.lease-advice.org/publications/documents/document.asp?item=18

Too lazy to read it, so apologies if it is not as relevant as appeared on skimming!!!

Fire_Fox

This is under lease extension, which clearly isn't directly relevant, but it does make some indication of the LVTs powers and relationship with the court system:

"Absent Landlords
If, after all reasonable efforts, the landlord cannot be found, this should not prove an obstacle to application for a new lease; the issue can be resolved in other ways.

• If the landlord is a company in receivership, then the Tenant's Notice may be served on the Receiver; similarly, if the owner is an individual who is bankrupt the Notice may be served on the Trustee in Bankruptcy. Both the Receiver and the Trustee are acting as landlord for the time being and are equally bound by the 1993 Act to respond, as landlord, in the service of a Counter-Notice and grant of the new lease.

• If the landlord just cannot be found then the leaseholders' Notice cannot be served. In this case the leaseholder may make application to the county court for a Vesting Order. If the court is satisfied as to the leaseholder's eligibility for a new lease then it will, in effect, grant the lease to the leaseholder in the landlord's absence. The court will usually refer the case to the Leasehold Valuation Tribunal for determination of the premium."

http://www.lease-advice.org/publications/documents/document.asp?item=8

timmyt

the smaller the number of freehold owners the more hassle the company can end up being, and who will take charge of it? individuals can be better, but depends on their cooperation and availability of course, but ask the Buyer for all their contacts details - though this can change and they can let their flatsout losing trace of them - but then they are all in the same boat too

ownig or not owning - not much diff - if at all - on the value of the flat....just ask an agent next door what his view would be (not the selling one as they are biased)

Richard_Webster

If the freehold is owned through a company (HIP may suggest this) then what is the mechanism for change of interest?

If company not in liquidation/dissolved it simply issues a share/provides membership certificate to buyer of leasehold flat. Freehold ownership stays with company and new lessee simply gets a say in running company.

Views differ about whether literal shared freehold ownership of small conversions or the use of a company is better. I tend to favour a company for reasons I explained in my long post but you have to accept that there is a certain amount of admin involved with one and there will always be a problem with a 2-4 flat conversion in finding someone prepared to do the leg work.

You cannot have literal shared ownership where there are more than 4 flats because no more than 4 individuals can normally have their names on a legal title. In that case you normally have to have a company. You can use a trust deed to save the company admin costs but I find the problem with trust deeds is that they actually very easily get lost because one solicitor draws it up and keeps it for the clients and the flats change hands several times and nobody remembers which solicitor has the trust deed!