Buy Your Freehold - guide discussion

propertyman

SKPatel wrote: »

So far as i am aware, the part of the legislation that requires a company to be limited by guarantee has not yet come into force. So for the moment, the participants can choose either form of company.

having spent a dreary afternoon in doors I looked up the commencement orders and humbly doff my cap to SK Patel-its not in force as yet. Discussion at the DCLG say that its so unworkable, which most of said at the time, it is unlikely to ever be commenced.

zoothornrollo_2

Hello.
I recently bought a first floor leasehold flat - there is another leasehold flat on the ground floor of the terraced house. I have 114 years on lease, she has 106; I pay £100 a year ground rent, think she does too.
We are interested in buying the freehold jointly - I have three questions:
1. As we both want to enfranchise, is the freeholder obliged to make us an offer?
2. I am in direct contact with the freeholder's management company, and they have asked us to make an offer: is there any reason not to make a (possibly very low!) offer direct, rather than through a solicitor?
3. I am finding online calculators not very useful for the purpose of estimating how much the freehold might be worth. It is easy enough to calculate it for each flat, but surely the freehold is for the building and therefore the price of the freehold should be based on what the house is worth etc, rather than 2 x flat?

Thank you!

SKPatel

Hello zoothornrollo,

In answer to your questions:

1. No the freeholder is not obliged to either make you an offer nor to sell you the freehold if they choose not to.

2. There is nothing to stop you from putting forward an offer although be careful of the figures- you don't want to offer more than a reasonable sum. Also, agree on legal fees and expenses as it may well be that the freeholder requires you to settle their fees.

3. Valuations are as much of an art as a science and i would suggest you speak with a suitably qualified surveyor about this. The terms of the leases and the value of the flats are taken into account as well as other factors. It is worth obtaining professional advice.

Good luck!

MrsT2402

Hi - I am looking for some advice on potentially purchasing a share of the freehold which covers the 3 converted flats within our building. The Landlord lives below and currently has a clause in the lease which prevents us from letting the property and this clasue is causing us some issues as we are trying to sell the flat. basically anyone wanting to purchase with a view to letting (of which there has been huge interest!) cannot buy it becuase of this clause. Knowing the lanlord, I know he would not remove this clause. So my question is, If I were to buy a share of the freehold and perhaps even encourage the other flat owner to do the same, would we then have any rights to remove/amend the lease and potentially remove this clause?

We lost our first buyer due to this clasue as they had a buy to let mortgage so it is becoming somewhat frustrating!

Any advice would be useful although I know I would need specialised legal advice if I did proceed with this option!

sydenhambased

MrsT2402, a couple of things.

1. There's no such thing as "share of freehold". Either a single person buys the freehold, or a limited company is formed, often by multiple leaseholders, that then buys the freehold. Shares in that company may be bought and sold. Often when a leasehold flat changes hands a share in the company is transferred from the old leaseholder to the new.
2. If the Landlord lives in the building, you have no right to buy the freehold. I suppose if you're flush with money and they're broke, it could be worth a try offering to buy it from them but you have no legal right.

thewitney

Hello,

When arranging to purchase the freehold a certain percentage of flat owners need to be in agreement to do this and each flat gets to vote.

Does anyone know the implications of owning multiple flats within the block?

i.e. if a block of flats contains 15 units and one person owns 4, do they get 4 votes or are they restricted to a certain number?

Regards,

M

Elixor

Hi all,

Amazing article on the site thanks.

I was wondering something about the setup of the company and the shares of freehold. Here is the scenario:

The scenario is (for simplification) 20 flats (10 interested in the freehold) and a value of £200k.

This means each flat would pay £20k.

My question are:
- What happens if one of the flat cannot afford the £20k but only £10k (their own share) can someone else buy their extra share?
- can someone actually buy multipla shares? I.e: all 9 flat buy for £10k each and one flat buy the rest for £110k?
- in the last can would this flat have more say in the formed company because they own more than half of the freehold?

Thanks for your help.

propertyman

The company will own the freehold not individuals. If the FH is worth £200K then
1 if 10 participate they pay £20k each
2 If 10 participate then if they pay variable amounts, then shares can be allocated accordingly e.g 1 share per £10k

Your concern is justified and voting rights can be attached to those shares on 1 vote per share or to prescribe what shareholders can vote on.

If a freehold is worth 200k you have to look at two issues.

1 As freeholder you look after the building and operate service charges and therefore it is usually best that it is 1 vote per flat (that participates)

2 if the building is worth 200k, why? Normally it is income rights, ground rent garage spaces, sometimes development rights but more usually it is lease extensions.

it is therefore important to be clear about this as it is often assumed that lease length is irrelevant as you own share of freehold. As explained the company owns the freehold and therefore inmost cases the asset value £200k is broken down into making a contribution and in turn getting a longer lease say 999 years, and the rest of the value is mostly the value of lease extensions for those that don't. Therefore where people make different contributions 1 for their long lease and 2 making up for the non contributors and other rights, that on those matters different voting rights should be given. Typically two classes of shares are issued or one share per flat and a loan to those that contribute which simply gives them a larger cut.

Its something that is best discussed with a professional.

Joanthebone

sydenhambased wrote: »

MrsT2402, a couple of things.

1. There's no such thing as "share of freehold". Either a single person buys the freehold, or a limited company is formed, often by multiple leaseholders, that then buys the freehold. Shares in that company may be bought and sold. Often when a leasehold flat changes hands a share in the company is transferred from the old leaseholder to the new.

I have a leasehold flat (999 years from 1964)=..I bought a few months ago. I have a share of the freehold, there are 4 flats. We do not have a company. I was assured by the vendor that all four 'freeholders' got on well and sorted out any problems as and when they arose.


I now find that one of the freeholders (a landlord) will not reply to any letters or phone calls, the other landlord has taken two letters and two messages left before he replied to me.


This second landlord is refusing to go along with the joint buildings insurance policy in future. My solicitor insisted that a joint policy be taken out before my purchase went through, which was paid for by my vendors. All four freeholders had, until then, had separate buildings policies, which according to my solicitor was breaking the terms of the lease. In this landlords opinion "I am a freeholder and I can do what I like, my solicitor said so" :eek:


I have spent a lot of money renovating my flat and love it, but I am unable to get anything done regarding maintenance of the property. What can be done to enforce the requirements of the leases and maintain the property? I think I will have to try and sell up as I cannot stand the stress and worry of it all.

propertyman

Well no you don’t have SoF as there is no such thing, and the reason for stressing that is the reasons you state, owners believe “ I am a freeholder and can do what I like”.

Lets say the four flats are owned by A B C & D, and therefore the freeholder is A B C & D as a single legal entity. They are known as joint tenants or tenancy in common and enquiry at the land registry will identify which the freehold title is registered as. I suspect that as often happens 4 people buy the freehold and that was that, with no further thought about how to get along and do things as a group for eh common responsibilities such as insure the building and pay a contribution to that under the terms of the lease. I suspect that the insurance that they have duplicates cover and together you are overpaying, or missing out areas of cover, insuring the flat and the remainder in an indemnity basis.

A recipe for disaster especially if someone inures the flat for what it is worth not the cost of rebuilding, which aren’t the same.

In the absence of agreement then i am afraid it is litigation for the court to force the others to agree to act or validate what you have done on behalf of the group, and as long as it is sensible, then the court will likely imply terms and rule in your favour.

Otherwise the law allows for the appointment of a manager, like a receiver taking over a business, after warning the other owners that you will do that. While still owning your leases and jointly owning THE freehold, control of all other matters will be put into the manager’s hands, and they make the decisions not you.
http://www.lease-advice.org/information/faqs/faq.asp?item=105