Share of freehold questions

Gondolfin

I own a literal share of the the freehold in a block of 5 flats, meaning that the freehold is held in common by all the freeholders and requires the signature of all to execute deeds. This has generally not been a problem but one of the freeholders has now gone missing . I have read around enough to know this could be a problem but I wondered how much this would affect our specific situation. Because we were forewarned about the situation by our solicitor when we bought the property four years ago, almost immediately we extended our lease to 999 years. Everyone else in the building did the same so everyone now has 990+ year leases with peppercorn ground rent. In this situation I wondered if:

1) The freehold is effectively worthless?

2) It is possible to sell our flat without transferring the share of freehold since the lease is so long and will be mortgageable? There is nothing in the leases that says that the freehold and leasehold are linked; largely they have been transferred as a matter of good faith in the past.

I also wondered how difficult it would be to get the missing freeholders name removed from the freehold title deed. It's an annoying situation.

propertyman

Well you have a figurative "share of freehold" as that does not exist. The four of you are joint freeholders. Even though they are missing, they are still, with you and the others, the freeholder. You cannot remove them simply because they have no wish to communicate.

While your solicitor wanted you about this, they could have suggested very simple remedies; eg holding the freehold in a company, having one share per flat which must be transferred on a sale.

In your case you must ensure that the 3 of you take any day to decisions and record them and notify the freeholder at the last known address.

If you are considering letting a new person into the freehold, or setting up a company or trust to manage the affairs of the freehold, you will have to trace them or apply to the court.

This is a common problem, it is the fault of residents thinking a lot about the future and not "what if" and advisor being lax at pointing out future problems and building in a solution.

Richard_Webster

Yes, your solicitor should have advised you about what might happen. You should have either had the freehold transferred to a company or set up a deed of trust that would have wording to enable you to dispense with the signature of the missing freeholder.

Literal "shared freehold" with no trust deed is a disaster waiting to happen.

It isn't the value of the freehold that is the issue - its the enforceability of covenants etc against the "freeholder" that is the point.

The problem is that if ABCD own the freehold and A has disappeared then if B wants to sell his leasehold flat to E, BCD need A's signature for B to transfer his "share" to E. To get A off the freehold title you need his signature or:

a) you go to court and try to get the judge to decide that there is an implied trust of the freehold in favour of the lessees for the time being and order the removal of the recalcitrant "trustee" or
b) the remainder of you go through the collective enfranchisement process (again) to "buy" the freehold. After a lot of palaver the LVT will determine a price and you will have to pay A's share into court before you get an order vesting the freehold in the present lessees.

Unless the issue is sorted, as nobody can transfer the freehold without A's signature, it goes into a kind of limbo - you can sell your leasehold flats but the freehold remains with the same people and eventually they will have nothing to do with the building and you will have an absent landlord - which causes problems with mortgageability.

Gondolfin

Thanks both, very helpful.

This sounds like a lot of grief with the courts one way or the other. I still have some hope of contacting the runaway freeholder so all is not lost yet.

I also wondered if it is possible for me to just surrender my "share" of the freehold and have my name unilaterally removed from the title deed.

Richard: on your option a), is there a reasonable chance of getting a judge to agree that there is an implied trust and what kind of evidence would we need to produce to support our case?

propertyman

I am going to be "MTG"* and say that share freehold is figurative, not literal.

While a change of ownership of the freehold will need the application to the court, I am more concerned about the freeholders ability to manage and meet obligations of the leases.

I am assuming that the deeds you need executing are related to individual flats rather than the freehold collectivity, is that correct, eg a deed of covenant on assignment(sale).

If so then selling the flats is problematic.

So, with the exception of changing ownership of the freehold, virtually other issues can be addressed by removing those powers from the freeholder and vesting them in a right to manage company comprised of the leaseholders.

As and when the other is found then the freehold can be transferred to the RTM Company, giving you the mechanisms to avoid these future problems ( by adding rules in the articles which become effective at that time).

I think it is better if you think 3 steps ahead, and not focus solely on the immediate problem.

(* An In joke - RW knows what I mean)

G_M

The other issue not touched on is maintenance. What if, say, a new roof is needed? The freeholders will need to agree whether/when to get the work done and who to employ to di it. as well as requiring payment from the leaseholders. I assume the missing freeholder also owns one of the leases so would have to be found to contribute his share...?

propertyman

G_M wrote: »

The other issue not touched on is maintenance. What if, say, a new roof is needed? The freeholders will need to agree whether/when to get the work done and who to employ to di it. as well as requiring payment from the leaseholders. I assume the missing freeholder also owns one of the leases so would have to be found to contribute his share...?

Well actually it has. RW suggested enfranchising themselves and I suggested Right to Manage.

Richard_Webster

(* An In joke - RW knows what I mean)

Propertyman, are you a refugee from LLZ where MTG has a meaning, in fact is a person?