Share of freehold - "as and when" maintenance charges

spend_thrift

I'm currently looking at a property that I want to offer on. It's a conversion and I want the ground floor garden flat. I asked about maintenance, ground rent etc and was told that it is share of freehold and there is no maintenance charge.

It seems that maintenance is done "as and when" and the 3 flats then club together to pay for it. I did a bit of digging on the Internet and have found a limited company registered at the same address called the "[address of house] Maintenance Co Ltd". It has had several directors over the years that roughly correspond with the dates the flats were sold.

I've never come across this before, and while it seems like a good idea, I don't really know how it works.

Has anyone had experience of this sort of thing before? Any advice?

Ionkontrol

This is exactly the same setup here.
4 x flats, we are all directors of the management company which owns the freehold, which is non profit making, so makes year end accounts nice and simple.

We put £150 a quarter in to the management company bank account and do jobs as they arise, pay buildings insurance etc, not when some third party management company says so.

It's great.

princeofpounds

if you are going to buy a leasehold flat I suggest that you acquaint yourself with how leases work (lease-advice.org is the best place to start).

Find out whether you will be just a leasholder, or have a share of freehold. It's best if you have a say in the freehold, particularly if you are in a building where the freeholders outnumber you in some way (as it's then hard to remove their management if you don't like it).

'As and when' is rare. Normally there is a sinking fund which is built up over time to make sure that you don't end up with a multi-thousand pound roof repair bill payable in on month

Don't believe what the EA tells you about the lease - read it yourself and do your own due diligence.

Richard_Webster

I'm currently looking at a property that I want to offer on. It's a conversion and I want the ground floor garden flat. I asked about maintenance, ground rent etc and was told that it is share of freehold and there is no maintenance charge.

It seems that maintenance is done "as and when" and the 3 flats then club together to pay for it. I did a bit of digging on the Internet and have found a limited company registered at the same address called the "[address of house] Maintenance Co Ltd". It has had several directors over the years that roughly correspond with the dates the flats were sold.

This is a common enough situation. Nobody wants to pay more than they have to until it is needed. May not be ideal but it is quite frequent. Not really a problem in itself as long as the people concerned get on with each other and the reason that larger sums aren't collected isn't that there is a difficult whatsit who won't pay any more even though others think it is sensible to put money aside for future major work.

When buying a flat such as this always talk to the other flat owners to get their take on the area and how the "management" works and whether they are happy with it.

You will need to get your solicitors to check the lease wording and obtain details of what work has been done in recent yaers. Lenders want to make sure the lease wording is acceptable. However please understand that the reality is that if one of the three decides to be difficult, then all the wording on earth will not make him change his mind without you spending a lot of money going to court.

The issue is much more acute with a 3 flat situation than say a 30 flat one where most people pay up and the odd one is left to fend for himself and generally gets sued - the costs being acceptable if he is 1 in 30. Here if one refuses to pay for some major work then the other two will have to each find 50% more!

bristolben

princeofpounds wrote: »

if you are going to buy a leasehold flat I suggest that you acquaint yourself with how leases work

Maybe you should do the same?

princeofpounds wrote: »

'As and when' is rare. Normally there is a sinking fund which is built up over time to make sure that you don't end up with a multi-thousand pound roof repair bill payable in on month

No its not. As Richard has said above, its getting more and more frequent. People simply don't want to pay out for management company to do absolutely nothing with their money.

princeofpounds wrote: »

Don't believe what the EA tells you about the lease - read it yourself and do your own due diligence.

Err if the EA is reading the same lease, then the info will be right. To me it sounds as if the EA has completely unfront about everything and explained everything very well.

spend_thrift

princeofpounds wrote: »

if you are going to buy a leasehold flat

I'm not. As I said in my OP I'm looking at a share of freehold flat.

princeofpounds wrote: »

'As and when' is rare.

Then I am lucky, because this flat has it. What I am looking for is advice from people who have experience of it, so I can make an informed decision about what I would be taking on if I bought this flat.

princeofpounds

Maybe you should do the same?

No its not. As Richard has said above, its getting more and more frequent. People simply don't want to pay out for management company to do absolutely nothing with their money.

Wow, that was unnecessarily aggressive. Why is suggesting that an understanding of leases is useful if you are going to buy one deserving of such a nasty response? Why is pointing the OP to the government-funded LEASE advice service worthy of hostility?

Perhaps you projected your own communication tone on internet message boards into my sentence, but it was not a sarcastic and caustic suggestion, it was just a plain old helpful suggestion that meant what it said.

Besides, having an opinion that 'as and when' is not that common may or may not be mistaken but it hardly constitutes total ignorance about how leases work in general.

I based my statement on personal experience - having lived in 5 blocks of flats in london, where each had a sinking fund. It's quite possible that this is misplaced - I use too strong a word in rare admittedly, and we are talking about a smaller block here where it could be a more suitable approach - but the key point was nothing to do with frequency but to point out that a sinking fund can be very useful to avoid huge lumpy bills on major emergency works that people may not be able to fund at short notice. I think that's pretty sensible to make people aware of.

Err if the EA is reading the same lease, then the info will be right. To me it sounds as if the EA has completely unfront about everything and explained everything very well.

It wasn't intended as a criticism of the EA specifically, but EAs frequently lie about leases. The following come to mind easily:
- 'no the service charge/ground rent won't go up much'
- 'of course you can make changes to the interior layout'
- 'no the freeholder is fine with pets/satellite dishes/clotheslines'
- 'I don't think there are any major works coming up'
- 'Dont worry, the building's insurance covers that'
- 'Yes this attic space belongs to the flat for storage'

Whilst the EA may well have a copy of the lease it will be a rare EA that actually reads it in full and an even rarer EA that is willing to take any legal liability for what they verbally say about a lease (or anything in that matter). In almost all respects a property transaction is caveat emptor and so I am trying to reinforce that the OP should do due diligence on this important aspect.

I'm not. As I said in my OP I'm looking at a share of freehold flat.

The FLAT is leasehold, just because you happen to get a share of freehold does not mean that the flat is not governed by the freehold/leasehold relationship as any other. If you are in a large block with a tiny share, or outvoted by a majority owner in a smaller block, in many cases it might as well be a separate freeholder for all the say that you get.

spend_thrift

Prince of pounds, I think the reason things are getting a little heated is because from your first post it was not apparent that you had realised what the OP was asking. Tbh, I thought your response that I should familiarise myself with the way leases work was a little uncalled for, and I was grateful that bristolben stepped in.

There has been some very helpful advice given here about people who have been in my situation, and I'm very grateful.

Thanks to all.

KiKi

Hi OP

Yes, I'm in this situation. I and the two other flat owners have an equal share of the freehold in a converted Victoria terrace (although the leasehold proportions are not equal).

We do everything 'as and when'. Absolutely NO point whatsoever in putting money into a 'fund' that we'd hardly ever use. No point paying another management company to do it when we're quite capable of having conversations and getting quotes between us. I pay the communal electricity (fire alarm, buzzer system, hallway lights) and they pay me back. I also pay the buildings insurance and get them to pay me back. We split big costs between us, and pay our proportions (45%, 27.5% and 27.5%). I keep copies of all invoices and quotes and keep a record of our spending on a spreadsheet, just to keep track of what we've spent each year.

I personally put £30 aside each month to pay for maintenance, but I've almost never spend it. Having said that, we needed to re-decorate the front of the house this year, and we had a leak in the top flat, so I've organised all the work: we've got scaffolding up (far cheaper than a third party management company would!), got all our own materials to do the painting ourselves (that suits us) and I've just commissioned a roofer to fix the chimney. We've all sat down and agreed the costs, and all paid towards it. It's great! And our house looks fabulously new!

If you can be grown ups and either run your own management company, or do it completely informally like my 'household', then it's a great way of working.

The house next door to me has one flat owner who refuses to co-operate, so they pay hundreds of pounds to a separate management company to do it for them. So they 'report' issues to the management company who get quotes and sort things out - and charge a fee for it! Plus, it takes FAR longer for them to get things done! Madness!

HTH
KiKi

spend_thrift

KiKi wrote: »

Hi OP
We split big costs between us, and pay our proportions (45%, 27.5% and 27.5%)

Ah this is very good to know - thank you Kiki.

How were the proportions worked out? Is it based on the size of each flat?

riva

I own a share of freehold for a block of 3 flats. My flat is the largest but we still all own 33.3%. All 3 owners are landlords ie all flats are occupied by tenants. We generally have a good relationship with each other and over the years the other 2 flats have seen a change in ownership. I've been the company director of the management of the flat for many years until recently, another flat owner kindly offered to take over. We've had roof repairs, illegal parking on our driveways, damp problems etc over the years and now probably due for painting and upkeep of the building. We share the corridor electricity supply. We do an 'as and when' so don't have a sinking fund.
One of the 3 owners has been a bit funny in the past and refused to meet up until I suggested that if no one was able to meet up, we were perhaps better off hiring outside management help, which would have cost us more. This made him do a round-about turn and after meeting up, things were much smoother. It is always harder to be nasty and/or difficult once you meet someone.
Overall, I like share of freeholds although I would personally be reluctant to enter into one which had a large number of flats unless they employed outside management. Make sure you talk to the other flat owners to get an idea of potential management issues. Expect to help out a bit in terms of pulling your weight to pay bills, do paperwork etc. It will all be appreciated and things would tend to run more smoothly then. PM me if you have any more questions as I don't follow the forums that much. Hope that's been of some help.