Share of Freehold - Do We Need a Company?

Mr_Hindley

Hi everyone - last year I bought a flat, share of freehold in an old Victorian conversion. In terms of maintenance, the freeholders just sort it out ourselves e.g. I'm currently sorting out some repairs to the roof and will (hopefully!!) collect money from the other owners directly.

There is a company in existence, that was set up when the freehold was bought out a couple of years ago. Its only function now seems to be that the buildings insurance is in its name. We have to file annual accounts for the company, which incurs a cost, and I'm wondering if the company could just be wound up and there's some other way the buildings ownership could be held. Could it be under just one person's name?

I should mention one complication - there are four flats in the building, but the freehold is split three ways i.e. the fourth flat is still leasehold.

My first post here after much lurking, so thanks in advance for any advice!

timmyt

Mr_Hindley wrote: »

Hi everyone - last year I bought a flat, share of freehold in an old Victorian conversion. In terms of maintenance, the freeholders just sort it out ourselves e.g. I'm sounds like you 3/4 have not come together to decide how you are going to run the company so that is a worry...ad hoc is never appealing when trying to sell to an incoming buyer currently sorting out some repairs to the roof and will (hopefully!!) collect money from the other owners directly.

There is a company in existence, that was set up when the freehold was bought out a couple of years ago. Its only function now seems to be that the buildings insurance no it is the landlord so must repair and contract in the company name for services to the building is in its name. We have to file annual accounts for the company, which incurs a cost, and I'm wondering if the company could just be wound up and there's some other way the buildings ownership could be held. Could it be under just one person's name? the company could transfer the freehold to the 3 of you, sure, as lawyers who set up a company for 4 flats is daft. It should be in individual names

I should mention one complication - there are four flats in the building, but the freehold is split three ways i.e. the fourth flat is still leasehold. no, you all have leasehold flats, but 3 of you own the freehold as directors of a company who has it in it's name...you 3 are your own landlords, and presumably receive the 4th persons ground rent, as why did they not buy into the freehold

My first post here after much lurking, so thanks in advance for any advice!

sounds like the 3 of you could meet and sort out what you have, as you all sound muddled. then go to a lawyer to sort it out

Richard_Webster

As TimmyT has said you can't just wind the company up - you would have to transfer the freheold to the three of you first!

Once the freehold is owned by the three of you, if one of you has his flat repossessed he will disappear. When you then want to sell your flat your buyer will want the share of freehold transferred so that the freehold registered title at the Land Registry shows his name alongside the other two. Problem: you need signature of repossessed flat owner and you can't find him!

Or further down the track you have dispute about something with another for the three freeholders. He says he won't sign over the freeholder unless you agree to his terms.

Another example where in this case the poster wanted to impose terms about stopping noise on bare floorboards, before extending a lease on a shared freehold is here: https://forums.moneysavingexpert.com/discussion/2980620 If there had been a company (and more than 2 flats) then majority would have ruled.

Other older threads illustrating the issue:

http://www.houseweb.co.uk/house/forum/Forum10/HTML/000081.html
and http://www.houseweb.co.uk/house/forum/Forum1/HTML/000371.html

So whilst there are problems with a company in that you have to submit returns etc the ownership of the freehold doesn't need to change when flats change hands!

Mr_Hindley

Thanks to you both for the feedback, extremely helpful, even if there are slightly differing opinions there on the merit of having a company!

I think I understand it a lot better now - wish I'd paid more attention when buying..! I didn't really understand that the freehold is registered to the company, and that I own the leasehold with the company as the freeholder.

One thing I don't really understand - as I also was buying a share of the freehold, and the freehold is owned by the company, how is my interest in the freehold formally registered? What proof should I have that I am part of that? I've gone back over my paperwork and can't find anything proving that I own part of the freehold and am not just an ordinary leaseholder!

One of the other freeholders has suggested I become a director of the company, although I've held off for now as I was a little nervous about signing up to a company that's existed before I came along. Is that necessary?

Oh, re the fourth flat - they were originally meant to be part of buying out the freehold, but apparently pulled out with a couple of days to go. Which didn't make the owner very popular! Still, he's down to a 69-year lease now, so hopefully at some point he'll come back looking for a lease extension - the money would be handy!!

Richard_Webster

One thing I don't really understand - as I also was buying a share of the freehold, and the freehold is owned by the company, how is my interest in the freehold formally registered? What proof should I have that I am part of that? I've gone back over my paperwork and can't find anything proving that I own part of the freehold and am not just an ordinary leaseholder!

When you bought your solicitor should have arranged for a share in the company to be transferred to you (or if the company was limited by guarantee, for you to become a member). So you should be able to show theta you are a member of the company that in turn owns the freehold, and that's all.

Your interest in the freehold is not formally registered. If you have shares in some big company you don't ask how your interest in the freehold of its head office in the City Of London is registered do you? Principle is the same, only in this case you have a much greater degree of control because there are only three of you rather than thousands!

Leasehold_Solutions

Mr_Hindley wrote: »

Oh, re the fourth flat - they were originally meant to be part of buying out the freehold, but apparently pulled out with a couple of days to go. Which didn't make the owner very popular! Still, he's down to a 69-year lease now, so hopefully at some point he'll come back looking for a lease extension - the money would be handy!!

You are absolutely right that this is indeed an opportunity not a threat.

You could consider approaching the leaseholder again and asking if they either want a lease extension or to buy their share of the freehold. You may find their circumstances have changed since the original transaction or it is a new owner. If they are thinking of selling, a lease extension will be almost obligatory because most buyers' lenders are unlikely to look favourably on a 69 year lease.

If the flat owner takes up your offer, your little company will then have a windfall that you could put into a reserve or distribute amongst you. Depending on the ground rent, where you are in the country and the flat value it could be a significant sum. If you want to find a local surveyor to value the freehold or cost of the lease extension then why not try a postcode search on the web site of the Association of Leasehold Enfranchisement Practitioners (ALEP) or one of the experts on this forum?

Before doing that make sure you speak to an accountant because there will be tax implications and you could mitigate some of that liability using various financial vehicles.