Buying Share of Freehold Advice

rxg111

Thank you all for your replies. I've asked my neighbour to keep me in the loop, but all things considered, I think it's unlikely that I will participate. As Leasehold_solutions says, this puts me in a good bargaining position. I'll join for a small cost or not at all!

_s79

Now that this one seems to have run its cause, I thought I would tag on to the end of this thread rather than start my own if that's ok.

The property I am looking at has 18 flats in total. They are all ~4 years old and were granted 999 year leases (so ~995 years remaining). The freeholds were bundled and signed back to the management company who are now in receivership. The solicitor is chasing it all up but it's made more difficult by the fact that the seller is actually the bank as it's a repo = little information coming back.

So, from what I can tell, there seems to be an ad-hoc system in place as someone is doing the garden (possibly just the front) and I assume paying the communal electric. Does this sound like a nightmare situation to get involved with?

The fact that there is a long lease is easing my fears, but 17 other landlords to make arrangements with is daunting.

de1amo

the bank should appoint a management company for the period to collect the fees etc to keep the block 'tidy'--i had a place in a simular situ. i am not sure if it the same these days but the freehold was offered to the leaseholders first (by law)--have to check that

_s79

I have just got home to a letter from the solicitor requesting information from the seller.

Here is the exact situation:

"...The freeholders leased the entire deveopment (18 flats) to the management company who in turn sub let to each tenant. The management company are no longer trading".

Richard_Webster

The 18 flat owners will need to set up a new company and try to buy the freehold from the receiver. Trying to get even a majority of the 18 to co-operate will be difficult!

Until a "real" freeholder exists the covenanter for maintenance repair and insurance of the block cannot be enforced. You may be able to proceed with indemnity insurance but not all lenders will accept this so it could be a problem when you want to sell. So really better not to get into the mess but let those already there sort it out.

_s79

Richard_Webster wrote: »

The 18 flat owners will need to set up a new company and try to buy the freehold from the receiver. Trying to get even a majority of the 18 to co-operate will be difficult!

Until a "real" freeholder exists the covenanter for maintenance repair and insurance of the block cannot be enforced. You may be able to proceed with indemnity insurance but not all lenders will accept this so it could be a problem when you want to sell. So really better not to get into the mess but let those already there sort it out.

Hi Richard,

The lender does allow indemnity insurance per the CML handbook but my solicitor is writing to them to confirm. By "better not to get into the mess but let those already there sort it out" do you mean wait until one of the existing landlords wants to sell and and let them tackle the issue?

Richard_Webster

do you mean wait until one of the existing landlords wants to sell and and let them tackle the issue?

Not sure what you mean by "existing landlords".

"...The freeholders leased the entire deveopment (18 flats) to the management company who in turn sub let to each tenant. The management company are no longer trading".

So there is freeholder who granted a long lease to a management company ("the headlease") which then granted individual underleases for slightly shorter periods (probably the same period as the lease from the freeholder less say 3 days). I guess that all the maintenance and insurance responsibilities for the block as a whole were to be undertaken by the management company. You are buying an under lease from an existing underlessee.

To sort the mess out a group of the flat owners - the underlessees - have to get together, set up a new company - and buy the head leasehold interest from the receiver or possibly once the company has been dissolved - from the Treasury Solicitor. Until that has been done you won't be able to make anyone maintain the structure or insure it.

The property could deteriorate as a result and you would be left trying to claim on the indemnity policy when you wanted to sell. That is better than having no policy but does not provide a solution to the problem. Even if in practice the block continues to be maintained and insured somehow or other, the technical defect remains and there is no guarantee a future buyer's lender will accept indemnity insurance.

So I am saying that if you buy the flat you may have the hassle of trying to get a majority of flat owners to put up funds to buy the head lease, and generally you find in these kinds of cases it takes a lot for people to get off their backsides and do anything, even when there is a serious legal problem. If they are not trying to sell their flat, they don't want to know.

mikeymac

I have tried to find the answer to my query on the various forum pages with no joy so thought I would tag onto this discussion as my query is regarding the purchase of a freehold.

I live in a leasehold Victorian conversion consisting of 3 flats. Myself and another leaseholder wish to buy the freehold but do not have a good relationship with the 3rd leaseholder so don't want him as one of the freeholders as he is particularly untrustworthy. If we were to buy the freehold and set up a company, how would the 1 remaining leaseholder tie in to this arrangement? Would he continue to pay myself and the other freeholder a fee for our managing of the property, much like when we were all leaseholders paying to a company who managed the property for the landlord?

If and when the one remaining leaseholder wanted to extend his lease, would we as the freeholders receive a fee for granting an extension to his lease?

I seem to be able to find an online 'calculator' that gives an estimate of how much it would cost to extend a lease but is there a similar tool available for estimating the cost of purchasing a freehold?

Many thanks in advance for any help offered

Leaseman_2

You have 2 out of three leases so you are entitled to enfranchise without the inclusion (participation) of the 3rd flat owner and in that case No 3 would (usually) continue according to whatever his legal commitment is to the existing freeholder.

The freeholder might however have to offer the 3 of you collectively the right of refusal to an application made by only 2? That's a question for a solicitor!

In practical terms, not to offer No 3 the chance to participate would be far from ideal and would bode badly for future relations...