Freehold Flat Trouble

Flatfooted

In 2007 I bought one of four flats in a Victorian house which was extended and converted in 1997. There was absolutely no problem getting a mortgage and my solicitor flagged up no issues.

During the summer I tried to remortgage and no one would touch me. The problem, I was told, was the lack of a management company. I have since tried to get my three neighbours to join me in setting one up but have been banging my head against a brick wall. I can never get all three of them in agreement at the same time. They worry about letting a management company own the freehold even though we would all be equal shareholders.

All four of us are currently buying our respective freeholds. I was advised to do this by a solicitor so that the freehold would not be bought by a landlord who would try to catch me out on every item of the lease.

However, do I now have a property I will never be able to sell if, as looks likely, my neighbours will not join me in a management company? Is there any legal framework I need to enter into? Is there anything I should do?

princeofpounds

How can you each be buying your respective freeholds? There is only one freehold. Unless you are planning to split the place into a series of flying freeholds, which any solicitor worth their salt will advise you against as it causes all sorts of hassle.

I am pretty sure this can be sorted out once everyone is educated, but I don't know the precise solution (partially because it is unclear what the exact situation is).

There is an excellent government-funded advice service called LEASE who will probably be able to help you out. Remarkably for a quango they appear to be very thorough with the information they provide.

Would also recommend you re-post this question on landlordzone forums, the long leasehold sub forum. There are a number of specialists there.

Richard_Webster

I think you need to explain what you have at the moment.

You say you are buying your "respective freeholds". Does this mean you don't have the freehold of your flat but there are separate freehold titles for each flat, as opposed to the building as a whole?

Lets be clear to start with. Does one entity own the freehold of the whole building? Is this entity or person contactable or is it a company that has been dissolved.

Management companies are a side issue at the moment in understanding your position.

Lets just get to the bottom of who owns the freehold. You can usually find this out by getting a copy of the entries for the freehold title form the Land Registry.

Jenniefour

Agree with princeofpounds - your neighbours and yourself need to get armed with information - it is definitely to everyone's advantage to buy the freehold between you, via the usual mechanism of a management company formed by yourselves. There would be no other owner at all - the four of you would own the freehold outright as equal shareholders and the management company would be yourselves. No external persons whatsoever involved.

G_M

Go to the Land Registry site. Pay £4 and download the freehold title. That will tell you the owner.
If you are interested for another £4 each you could download the leaseholds and confirm the names and mortgagees for each flat-owner.

Flatfooted

I received a letter from my landlord - a local builder - in October, offering to sell me the ground rent to my flat under the terms of the Landlord and Tenant Act 1987. Since then I have received a letter from his solicitor (November 4) referring to sale of freehold.

I've spoken to two lawyers on the matter and got entirely differing opinions. One said there would be no point at all in buying my quarter of the total freehold and another encouraged me to buy it to avoid it being sold to a shark company. However, neither has disputed that I can buy the freehold for my flat.

I have to confess that I'm thoroughly confused by the matter. I just want to be confident that I can sell the place one day and also to get a good mortgage deal.

G_M

Start by answering Richard's question. He will talk you through from there. Without full knowledge, noone can advise you.

Flatfooted

I've been to the Land Registry site and the registered owners of the entire building and surrounding land are the man I've always considered to be the landlord - to whom I pay ground rent - and another gentleman.

It's the man I've always considered to be the landlord who has written to me offering the chance to buy the ground rent/freehold.

Richard_Webster

I have said this before and will say it again. Buying the freehold of just your flat is like throwing money on a fire:

1. You pay the freeholder for the freehold; then
2. The value of the flat depreciates by around 30% as it becomes unmortgageable; and then
3. You have to pay to restore the position to one that will enable the flat to be mortgageable.

Pure freehold flats are usually unmortgageable because freehold owners cannot compel payments of money and positive acts (e.g. of maintenance) relating to the other parts of the buildling just because they own a neighbouring freehold - there has to be a direct covnenat relationship between them. This means that in effect every time any flat changes hands all the other flat owners have to join in a deed of covenant with the new flat owner, and you can never make people do this, so it just doesn't work.

You need to read the letter from the freeholder carefully. He is probably suggesting that you get together with the other flat lessees to buy the freehold of the entire building. That is generally worth doing.

It is best to have a specialist flat management company set up which will be owned by you all and for that company to actually acquire the freehold - this lessens the hassles when a flat changes hands in the future as you are not then having to transfer "shares in freehold" at the Land Registry, as the same company continues to own the freehold. I use http://www.fcls.co.uk/company_flats.asp for this, and no, I don't have any shares in them!

The point about there being no management company is not a valid reason for the flat being unacceptable. There is no law saying you must have one. What is more likely is that the present freeholder is not doing any managing, e.g. not arranging insurance of the block or carrying out essential repairs that are his responsibility under the leases. Hence the need to collectively acquire the freehold.

Unfortunately it is true that if the group of you do not do this then the freehold may end up getting sold to a shark property company.

If you bought just your freehold a shark company would probably offer peanuts for the rest of the freehold because it would be tainted and then pay you peanuts (or ask to you to pay them) to acquire your freehold from you.

Flatfooted

Thanks very much for this. It gives me lots to ponder. If only I could get some sense from my neighbours!