Should i buy this Share of Freehold Property

jcgwakefield

I'm currently in the throws of buying my first property, its a share of freehold and I have come up against an obstacle, how should I tackle it?
My Solicitor has told me that the share of freehold, which is between three parties, has no company/official agreement in place, so effectively its easy to buy it for me, but when I come to sell I need the signature of the two other parties, easy right?
Unless, one of them is incapacitated, out of the country, does not want to sign or what ever else.
So, then the property cannot be sold, and I suspect I want to sell in a couple of years. My Solicitor says this is a very dangerous position to be in and unless the issue is resolved I should not buy.

So, I spoke to one of the neighbors who purchased the property six months ago and asked her what she new, and she confirmed its a Gentlemans agreement but her solicitor thought nothing of it , and that my solicitor was doing some crystal ball gazing/covering his back, fair enough.

So, now I think I should go to the seller and say, sort this out or I'm not buying, or is this no big deal and I should not worry about it?
For what its worth my opinion is that setting up the company, getting out of the gentlemans agreement and paying the financial expense is an insurance policy worth paying, but I suspect the other two parties won't see it that way, stalemate.

kidmugsy

To me the expression "gentlemen's agreement" shrieks out "Don't touch it".

Fire_Fox

Why are you purchasing a property you will want to sell in a couple of years? Are you sure you won't make a hefty loss? Wouldn't it be cheaper to rent once you take into consideration the relatively static market, costs of buying and selling, service charges etc?

jcgwakefield

Look, a may well NOT sell it, as I would be happy to live there also, but that's not what I am concerned about right now. I want to know how common this kind of setup is, I am going to tell the seller I want it sorted but I suspect he will not comply, has anyone else encountered this issue before? Have you any specific advice?

propertyman

A post that makes me happy and sad :wall::)

:wall: because you are NOT buying a share of freehold property - no such beast.
You are buying a lease of the flat, and separately a freehold which which you with own with two others.
Because at last a solicitor has understood the shortcomings

The first is important as the lease to the flat is

• what you will own
• get a mortgage on and sell.

The lease has to be reviewed to ensure that it is adequate to ensure maintenance and insurance responsibilities, that it deals with relations between other owners, and is long enough so that you can sell it in 2 or 10 years without a fall in value due to a shortening lease.

If you think getting a TR1 form signed is hard, try agreeing a lease extension!

The second is important in that they do not need to be held in a company which will still requires two signatures, but whether it is a company or a trust deed or partnership the Solicitor is right that arrangement for sales have to be firm.

Moreover, what I don't see is the warning that there is no agreement about how you will deal with matters when you dont agree or someone refuses to engage.

I suggest that you have two options

1: try and get them to agree to transfer it into a company which you can set up for £50 to £300
http://www.ukincorp.co.uk/s-1F-uk-property-management-company-formation.html - it's an example
2: Understand that the Court can arrange transfers where others are missing or incapacitated, and insure with an indemnity policy agaisnt those costs.

But, in 2, if your leases are relatively short and have ground rents then there can be a substantial value to the asset and therefore you will likely have to pay a sum into the court should a missing freeholder appear to claim their ownership.

But most of all understand that the average EA has no clue about such things, most have to wear slip on shoes because laces are too complicated, that the lease is crucial in length and adequacy,and share of freehold, if it means anything relates
a: to your joint ownership of the freehold, while
b: YOU own a lease of a flat..

Good luck feel free to pass this note to your solicitor to discuss it.

jcgwakefield

Thanks for this info, so if I 'm correct your essentially saying I should get them to sort this before I buy, turn it into a company and get it above board, which is what I think.
Also, pleased to hear myself and my solicitor are making a fuss over something and not nothing. I will keep you posted on developments...

thelem

Let's say the worst happened and he bought the property but all other freeholders had disappeared when he came to sell, what would be the impact? Would he be able to sell it as a leasehold flat at a relatively small loss, allowing him time to find the other freeholders so he could sell the freehold too?

Fire_Fox

thelem wrote: »

Let's say the worst happened and he bought the property but all other freeholders had disappeared when he came to sell, what would be the impact? Would he be able to sell it as a leasehold flat at a relatively small loss, allowing him time to find the other freeholders so he could sell the freehold too?

A buyer's solicitor normally puts queries to the freeholder(s), it's not really appropriate for the freeholder with the vested interest to be the one that responds. They could be like "noooooo of course there are no expensive planned works/ debts". Also freeholders need to agree the transfer of the long lease because they are the other party to the legally binding contract.

A cash buy might be willing to take risks for the right price, but lenders are more reticent. I believe there is stuff you can do via the LVT and/ or court but that is grief.

observations_from_a_hill

Sorry to be late for the party, I just want to thank propertyman for his post. Most people (until things go awry) can't be bothered to understand what it means to buy the freehold of their building.

jcgwakefield

I have been told that insurance can be taken out against this kind of situation going wrong, that would cover all the legal costs, anyone know of one?

G_M

jcgwakefield wrote: »

I have been told that insurance can be taken out against this kind of situation going wrong, that would cover all the legal costs, anyone know of one?

Even if you can insure against legal costs when it goes wrong, that does not make putting it right quick or simple.

If the roof is leaking but freeholders cannot agree when/when to fix, or who to use, OK - you resort to the courts and get your legal costs paid. But you still have months of leaking roof...

Same trying to sell. No one signs the transfer. By the time you've been to court using your legal insurnace, your buyer has moved on..