Share of freehold: How to extend Lease?

KTF

propertyman wrote: »

Wrong I am afraid. You cant sell something which does not exist and there is no such thing as SoF - Freehold leasehol of common hold thats it.

You have a lease of 73 years.
You have a share in or are a member of the company that owns the freehold.
The company owns the freehold and the right to the reversion- the flat back empty, at the end of the lease.

The latter has a value to the company and in the abscence of an express agreement in the participation agreement or the memorandum, they can seek the full market value of the lease extension.

If the leases are the same length, then yes all all parties would be entitled to the same, but some might see the opportunity to put cash into the company and use it now for costs to the building.Thats not making a profit.

I would be looking at the FH title at HMLR and see if the leases have been extended and ask for the same terms.

I am confused as the management company is just a 'shell' that holds the lease. I cannot see how each flat owner would decide to want to pay a lot of money for a lease extension just for it to sit around unused in the pot?

There is no ground rent involved as everyone just splits the bills as/when required. This has worked well since the inception of the company which is there is no money in the management company.

twisty

nobody in their right mind is going to want to charge themselves (as a shareholder in the freehold company) the market rate for extending their own lease, purely to build money up in the company's bank account.

In the real world, with real people, the real situation is that you will just have to pay the legal fees.

KTF

twisty wrote: »

nobody in their right mind is going to want to charge themselves (as a shareholder in the freehold company) the market rate for extending their own lease, purely to build money up in the company's bank account.

In the real world, with real people, the real situation is that you will just have to pay the legal fees.

I agree as doing that serves no purpose and cannot see why anyone would do that.

TrickyDicky101

Propertyman's point would be especially valid if the remaining lease terms differed in any way (how sure are you that they are all identical?) - if someone had in the past extended their lease out to 150 years, then it would be in their economic interest (through their part ownership of the management company which would receive the money to extend) to insist on the other leaseholders who wish to extend stumping up the full cost (whatever that may be). Note I said economic interest and not neighbourly interest.

socrates

twisty wrote: »

I'm in a similar boat myself, except that I own the flat that is being sold.

We've recently bought, along with the other flat owners, the freehold for the building, and we are now looking at extending the leases of each of the flats. Each currently has 78 years remaining.

The cost is simply whatever a solicitor charges you for doing the legal work.

We have been quoted £325 per flat, reduced to £275 per flat because we have already passed a lot of work this solicitor's way when buying the freehold.

I'm still waiting for an answer on timescale but I think it is largely dependent on how motivated the other flat owners are. I think you are talking weeks rather than months.

£325 or even £275 sounds very cheap to me

propertyman

KTF wrote: »

I agree as doing that serves no purpose and cannot see why anyone would do that.

Well I have only spent nearly 30 years in general practice and residential management as a specialty- what do i know ?

The answer is that even if the leases are the same length, say its me and I am 70 odd years ( I am not but know plenty who are) old don't give a hoot about what its worth when I am gone, but see chance to get you to pay say £10000, which means I dont have to pay SC for the next couple of years as the Company will have your £10k in the bank.

I am confused as the management company is just a 'shell' that holds the lease. I cannot see how each flat owner would decide to want to pay a lot of money for a lease extension just for it to sit around unused in the pot?

That answers your question as to why. You are confused as you are using terms you don't understand. You have lease, you hold it , not the company, and it expires in 73 years, which if the flats are even of a modest value means the company has an asset the freehold subject to a number of leases which meed extending and is therefore worth quite bit of money.


While you cant see it I wouldnt have answered in the way that I did or that this is a common problem if it wasnt. Your opinion and hope is not a substitute for the actual position.


I have offered an answer above so perhaps follow that ( check the participation agreement, memorandum and FH title) and I hope that the others agree £1 plus legal costs in the spirit of mutuality, and that there aren't any greedy individuals looking after their own interests, being advised by me

PS if you search MSE you will members ho have that very problem being charged even though they jointly own the freehold as a group or via a company.

KTF

propertyman wrote: »

Well I have only spent nearly 30 years in general practice and residential management as a specialty- what do i know ?

Am not saying that you dont know what you are saying, just trying to get my head round all this.

propertyman wrote: »

The answer is that even if the leases are the same length, say its me and I am 70 odd years ( I am not but know plenty who are) old don't give a hoot about what its worth when I am gone, but see chance to get you to pay say £10000, which means I dont have to pay SC for the next couple of years as the Company will have your £10k in the bank.

There is no annual service charge. Once a year the bill for the communial insurance arrives, gets divided by 8 and thats it.

propertyman wrote: »

That answers your question as to why. You are confused as you are using terms you don't understand. You have lease, you hold it , not the company, and it expires in 73 years, which if the flats are even of a modest value means the company has an asset the freehold subject to a number of leases which meed extending and is therefore worth quite bit of money.

Ok, I understand that as the company has the freehold then that asset has value.

propertyman wrote: »

I have offered an answer above so perhaps follow that ( check the participation agreement, memorandum and FH title) and I hope that the others agree £1 plus legal costs in the spirit of mutuality, and that there aren't any greedy individuals looking after their own interests, being advised by me

I have all the paperwork from when the company was incorporated so will read through that.

I do see the point that you are making and whilst you cannot automatically assume that they will accept £1 plus legal costs it will depend on the advice (if any) that they get when the details of the extension land on their mat.

twisty

socrates wrote: »

£325 or even £275 sounds very cheap to me

There are 18 flats who are all extending their leases at the same time. So the solicitor will be making 5-6k.

The answer is that even if the leases are the same length, say its me and I am 70 odd years ( I am not but know plenty who are) old don't give a hoot about what its worth when I am gone, but see chance to get you to pay say £10000, which means I dont have to pay SC for the next couple of years as the Company will have your £10k in the bank.

Surely one individual stakeholder of the Company (out of 8 in total) would not have the power by himself to force through this course of action? In matters relating to my building, we require a majority to agree.

propertyman

twisty wrote: »

Surely one individual stakeholder of the Company (out of 8 in total) would not have the power by himself to force through this course of action? .

Not by themselves no, but it's corrosive thinking and is attractive to many, especially those in poor financial positions who will worry about lease length " as and when"

Again I say this out of considerable experience.

In some cases the original group may take the view that they get these for free but newbies have to pay.......

Richard_Webster

Propertyman has in his signature line:

Stop! Think. Read the small print. Trust nothing and assume that it is your responsibility. That way it rarely goes wrong.
Actively hunting down the person who invented the imaginary tenure, "share freehold";if you can show me one I will produce my daughter's unicorn

People think that because they have a "share of freehold" they have special rights as such. As he has been at pains to point out there is no special form of tenure called "shared freehold", it is merely a convenient short hand term to describe a particular kind of leasehold situation.

As a lessee you have only have a right to a lease extension once you have owned the flat for 2 years and you pay the going rate which depends on the value of the flat, the ground rent payable, and the number of years left in the lease term.

Although it may seem pretty unfair etc for co-freeholders to conspire to charge fellow co-freeholders, it does happen, because, amongst other reasons:

1. Most of them or their predecessors had their leases extended years ago and have forgotten the "deal" that provided for it as a virtual freebie...
2. As Propertyman has suggested, older residents may feel they will go out in their coffin and so aren't bothered about having their extended but could do with the money form other lessees, perhaps by way of reduction in service charge to use up the "windfall" lump sum.
3. Little Hitler runs block (there are plenty of them around, and unbelievably they usually have a following of others who can't see anything wrong with them) and said Little Hitler beleives it is the law that freeholders must charge the going rate for an extension, and cannot see the difference between something a freeholder is entitled to do and something he must do.

So whenever buying a "shared freehold" flat with a shortish lease the buyer should require the seller to organise a lease extension.

If the seller can't do this, then one has to ask about how bad the relationships in the block are and what trouble the buyer will have later on... Seller will always see how easy it is for you to do later etc... but if it is so easy why can't he do it now?