What to be aware of when buying share of freehold?

richardw

Did you ask the vendor why they haven't extended the lease?

rpc

crocco wrote: »

I have identified the management company has 10 shareholders.

10 shareholders and 16 flats (with some shareholders not resident) is already ringing alarm bells. It might be an innocent explanation such as BTL but it needs looking at.

If the lease is so easy to extend, the seller can do it. Sellers who refuse to may well be hiding something.

crocco

I haven't spoken to the vendor yet. He's sitting on my offer and the agent doesn't want to chase him just yet.

As you say I should probably find out whether the vendor has had any issues renewing the lease and try to combine a lease renewal with the purchase.

Can you please explain why BTL would lead to there being less shareholders than flats?

thanks for the all the help it's been very useful

propertyman

Well first of all you are not buying share of freehold there is no such thing.

What you are being offered is the vendors share in the company that owns the freehold .

http://leaseholdpropertymanager.blogspot.co.uk/2013/07/extend-my-lease-i-have-share-of-freehold.html

1.as there are 16 flats and 10 shareholders that 10 will have had paid a sum which reflects the right to sell lease extensions in the future, and it is likely that for the other 6 they will charge eh full premium. If the vendor participated then there should have been an agreement between them as to how and when and how much they would extend there leases.

Often they don’t due to poor advice and belief in the mythical share of freehold. That means that the 10 shareholders could agree to charge each other the full price, especially where a few have no interest in doing so and see the chance for a nice cheque.

Your S should be enquiring of the freeholders now.



2. Again it’s a company an the decision is made by its directors though such a decision might be put to all the shareholders.

3. See 2


4 Well it is.


5 Selling a flat has nowt to do with consent and extending a lease. Its his flat to sell.

6 many but none relevant here see 1


7 You should be talking to your solicitor to explain once they have made enquiries as its too broad subject to cover here.

princeofpounds

To put it in simple terms, the same people can be leaseholders in the flats and hold shares in the freehold company, but that certainly does not mean extending the lease will be free.

For example, consider the following situation.

Leaseholders A, B and C, under Freehold company X.

Leaseholder C intends to sell to you, with their share in X.

A and B both have terrible gambling and crack habits, and owe their bookies/dealers 7k each.

By coincidence the market value for extending Lease C is 21k.

A and B could agree with you to charge nothing for lease extensions. But they will of course much prefer to get X to charge you the full 21k and dividend it out to all three parties.

You will get a 1/3rd refund, and A and B get to keep their kneecaps for now.

Of course A and B should therefore be paying market rates for their extensions also. But they might want to worry about that in five years time, not now.

crocco

This is what I can glean so far:

- The company has no articles therefore no special provisions exist regarding charging for leases extensions.

- This means I would be open to being screwed on the price by the other shareholders in the company if they so wish.

- If all the shareholders have the same lease length of 75 years my position is however strengthened because it would be in their interest to extend the lease.

- I probably need to get the vendor to extend the lease prior to purchase and factor it into the purchase price

Thanks once again for everyone's help on this

tim123456789

richardw wrote: »

Did you ask the vendor why they haven't extended the lease?

Probably because he had no idea that he might need to,

Pre-crash, almost no-one quibbled about paying full price for properties with medium length leases.

tim

Fraise

crocco wrote: »

This is what I can glean so far:

- The company has no articles therefore no special provisions exist regarding charging for leases extensions.

- This means I would be open to being screwed on the price by the other shareholders in the company if they so wish.

- If all the shareholders have the same lease length of 75 years my position is however strengthened because it would be in their interest to extend the lease.

- I probably need to get the vendor to extend the lease prior to purchase and factor it into the purchase price

Thanks once again for everyone's help on this

If a company has been formed it must have articles drawn up by the solicitor. Also, if you're buying a share of freehold by way of a company share, then the freehold is infinity. As a director and freeholder you can draw up your own lease. You don't need permission from the co-freeholders/directors.

propertyman

Fraise wrote: »

As a director and freeholder you can draw up your own lease. You don't need permission from the co-freeholders/directors.

Nonsense fraise the leases have to be in a similar form and address the specific rights and repsonsbilities at the building, on a common basis.

Along with your other thread I think you need to forget a lot that you think you have learned or more likely, made up

propertyman

- The company has no articles therefore no special provisions exist regarding charging for leases extensions.

Well no thats not what has been said. Agreements if any, over lease extentions may exist in original participation agreement or discussions- minutes, or a declaration of trust, and are very unlikely to be in the articles.

This means I would be open to being screwed on the price by the other shareholders in the company if they so wish.

No they will charge the price of a lease extension, you wait for 2 years to acquire the statutory right wioth independant determination of the price, the vendor exercises that right, or may even reveal that three are provisions in place for a legal costs only extension for the original participants.

- If all the shareholders have the same lease length of 75 years my position is however strengthened because it would be in their interest to extend the lease.

No and that was explained in another post(s) they may not be worried about extension.

- I probably need to get the vendor to extend the lease prior to purchase and factor it into the purchase price

One solution as above, however you should be only paying the open market value for the flat with that lease as a purchase price in the first place. The cost of a lease extension is therefore "extra".

No doubt theyhave put in the market regardless of lease length and your purchase price is higher than it should be.