Commonhold or not

rizla01

Hi all,

The flat above the one we own has just been purchased by an investor and he has approached us as he thinks we are best off owning the freehold jointly.

I agree as the Insurance alone is £300pa more than we have been quoted, and the figures for purchasing (£3000 +Vat + Sol fees) do add up.

My solicitor has suggested that we both start up a Limited Company that will own the freehold and jointly, we would be partners in the business.

Is this the same as Commonhold?

Anyway, the other leaseholder is not keen for this claiming that it is unneccessary but if, for example, we decide to sell and he is away on hols for 6 Mths - our sale would be jeopardised, plus I understand that there are a few other benefits to a limited company owned freehold.

Can anyone tell me what Disadvantage there is to doing things this way? I.E. why would he be against it?

Any other thoughts will be very welcome.

Richard_Webster

Is this the same as Commonhold?

No, commonhold is an entirely separate way of owning flats where there is no time limitation as in a lease, but is not popular with developers who can't make an extra bit of money from selling off the rights to collect the ground rents to property companies. I've never seen an actual commonhold and I understand that there are only a dozen or two in the country.

The only real downside to a company set up is that you have to make sure the company stays in existence by filing basic annual returns each year at Companies House. As the name of the freeholder registered at the Land Registry doesn't change - it will always be your company - when you want to sell your flat you are not beholden to the to the other freeholder, who might refuse to sign over the freehold because of some unrelated dispute or disappear.

The point to make to him now is that whilst you two may get on fine if either of you sells your flat in the future how you do either of you know that you will get on with buyer or he won't have his flat repossessed for non-payment of mortgage and disappear. Mortgage lenders don't take security on the freehold so they can't do anything about passing over the "share" in the freehold to their new buyer.

Another method is to keep the literal ownership but have a deed of trust that basically allows a flat owner to ignore a recalcitrant or absent other flat owner if he won't sign over the "share" in freehold to the first flat owner's buyer.

propertyman

You overcome the issue of transfer by a mortgagee in possession and lease length by
1:varying the lease to say 999 years at a peppercorn rent and
2:a clause that obligates any new owner to take share/become a member of the company that owns the freehold.

In the Articles of that company state that membership.shareholding ceases on ceasing becoming a owner of a flat.

If the 2 of you disagree it is recommend that with only 2 members/ 1 per flat, that an arbitration clause is inserted so that stalemates can be resolved.

This is easier and inexpensively done by a suitable solicito.

propertyman

Commonhold

There is only one active scheme and the remainder are registered but dormant and are not active.