Unexpected leasehold problem - advice requested

ChrisH48

Hi,

I own a flat in a building of 7 (converted 1830's property) which I also live in. This is a leasehold property. Recently the sale of the flat next door fell through at the last minute - due to a problem with the lease. The owners solicitor has looked into it and his findings and suggested course of action is shown below (this is from an email from the solicitor that was sent on to all other flat owners - with names etc removed).

I wanted to ask if anyone had a view in terms of validating his findings - it seems unfair that each flat is likely to have to pay almost £2000 to get this sorted out? so is anyone aware of any alternative approaches that could be taken to resolve this?

Im struggling a bit to fully understand some of what is written below so any help would be hugely appreciated.

Many thanks.

Chris H

Just to recap the problem here is that the Landlord (********* Limited) of the leases for all of the individual apartments was dissolved as a Company in 2010. This means that there is no Landlord and so there is no one who the apartment owners can enforce the covenants in their leases against.
The Management Company is a party to each of the leases and in each lease has agreed to provide some of the services as specified in the lease. In practical terms this has meant that ******* Property Services have been able to manage the building and charge the service charge to the apartment owners but in legal terms this does not change the defective status of each lease.
What this means is that if an apartment owner wants to sell their apartment is unlikely that they will be able to sell as any buyer’s solicitors should discover the problem even if they are not told about it by the seller.
This means the apartments are not marketable.
The problem cannot be covered by any form of indemnity insurance to correct the defect.
The freehold of the whole building is owned by ******* Limited. They (their predecessor) granted a lease of all of the apartments to ****** Limited. That lease is not in a form which entitles ***** to terminate it on the insolvency of ******* Limited. If the lease had contained such a provision then ***** could have forfeited that lease and then the subleases of the apartments would have become leases direct with ******* and the problem would not exist.
DAV (and their solicitors ****** LLP) have been approached but they are not interested in getting involved despite the defective title being an issue to them as well.
An approach has been made to the Official Receiver of ******* Limited who was unaware that the Company had an asset when they dealt with the winding up of the Company. The hope was that the OR would get involved and reinstate the Company and then transfer the leasehold interest of the Company to the Management Company. The OR will not do that but has said he will not oppose an application being made by the Management Company (or the individual flat owners) to the Courts to reinstate the Company to the register at Companies House solely for the purpose of selling the lease to the Management Company. Once the Court Order has been obtained the OR will instruct his own solicitors to sell the lease on the understanding that all of his legal costs are paid and a premium of £1000 per flat is paid. If this cannot be agreed he will obtain valuation evidence and sell at whatever that valuation may be.
To do that we need to have consent from the Treasury Solicitors Department as the lease has now vested in the Crown. Provided we can get consent then an application could be made but on the basis that we will have to pay all of the Treasury costs.
I am awaiting a response from the Treasury Solicitors and will update you asap.
As a rough indicator my fees to reinstate the Company are likely to be in the region of £1250 plus vat and the Court Fees. My costs to transfer the lease to the Management Company will be in the region of £500 plus vat plus expenses which include Land Registry fees. There should not be any stamp duty to pay.

You have to add to those fees the OR fees and any premium which is paid (he has requested £7000) and the Treasury Solicitors fees so the total quickly adds up.
The timescales for this are about 3 months to obtain a Court Order and say another 4-6 weeks to complete the transfer of the lease.

G_M

My first reaction on a brief reading is that you are making it hard for us.

Using "xxxx" and "xxxx Company" when different names are (I think!?) involved makes it difficult to understand the structure.

Can you edit your post to clearly differentiate companies/individuals?

eg "AAAA Company" / "BBBB Company" individuals "C", "D" etc?

then I'll read again.......

shopbot

I found this to be a very useful website when dealing with leasehold issues: http://www.lease-advice.org/

I would advise getting specialist legal advice. It will be costly but perhaps you could share the cost with the other leaseholders.

SB

ChrisH48

Apologies - here you go:




Falconers Apartments


Just to recap the problem here is that the Landlord (AB Limited) of the leases for all of the individual apartments was dissolved as a Company in 2010. This means that there is no Landlord and so there is no one who the apartment owners can enforce the covenants in their leases against.


The Management Company is a party to each of the leases and in each lease has agreed to provide some of the services as specified in the lease. In practical terms this has meant that the management company have been able to manage the building and charge the service charge to the apartment owners but in legal terms this does not change the defective status of each lease.


What this means is that if an apartment owner wants to sell their apartment is is unlikely that they will be able to sell as any buyer’s solicitors should discover the problem even if they are not told about it by the seller.


This means the apartments are not marketable.


The problem cannot be covered by any form of indemnity insurance to correct the defect.


The freehold of the whole building is owned by CD Limited. They (their predecessor) granted a lease of all of the apartments to AB Limited. That lease is not in a form which entitles CD ltd to terminate it on the insolvency of AB Limited. If the lease had contained such a provision then CD ltd could have forfeited that lease and then the subleases of the apartments would have become leases direct with cd ltd and the problem would not exist.


CD ltd (and their solicitors EF LLP) have been approached but they are not interested in getting involved despite the defective title being an issue to them as well.


An approach has been made to the Official Receiver of AB Limited who was unaware that the Company had an asset when they dealt with the winding up of the Company. The hope was that the OR would get involved and reinstate the Company and then transfer the leasehold interest of the Company to the Management Company. The OR will not do that but has said he will not oppose an application being made by the Management Company (or the individual flat owners) to the Courts to reinstate the Company to the register at Companies House solely for the purpose of seling the lease to the Management Company. Once the Court Order has been obtained the OR will instruct his own solkicitors to sell the lease on the understanding that all of his legal costs are paid and a premium of £1000 per flat is paid. If this cannot be agreed he will obtain valuation evidence and sell at whatever that valuation may be.


To do that we need to have consent from the Treasury Solicitors Department as the lease has now vested in the Crown. Provided we can get consent then an application could be made but on the basis that we will have to pay all of the Treasury costs.


I am awaiting a response from the Treasury Solicitors and will update you asap.


As a rough indicator my fees to reinstate the Company are likely to be in the region of £1250 plus vat and the Court Fees. My costs to transfer the lease to the Management Company will be in the region of £500 plus vat plus expenses which include Land Registry fees. There should not be any stamp duty to pay.





You have to add to those fees the OR fees and any premium which is paid (he has requested £7000) and the Treasury Solicitors fees so the total quickly adds up.


The timescales for this are about 3 months to obtain a Court Order and say another 4-6 weeks to complete the transfer of the lease.

ChrisH48

Thanks for the lease advise org tip - I sent them a query this morning.

Perdi

You do need specialist advice on this as it sounds like there was a couple of companies involved. We came across simpler versions of this situation quite frequently in a previous job, where leaseholders hadn't understood what was required to keep a limited residents management company running when it held the freehold, company gets struck off at Conpanies House to not filing returns or such like and no-one realises the implications until one of them comes to sell. Essentially the state/crown whatever you want to call it now owns your freehold.

In order to get it back the term is restoration of a limited company. It is expensive & there isn't really a way round it. You are all going to have to share the cost as it affects all of the flats. A starting point to read up on it here https://www.gov.uk/government/publications/bona-vacantia-dissolved-companies-bvc1/bona-vacantia-dissolved-companies-bvc1

lonestar1

How long was the lease that the freeholder sold to the now defunct company ?

ChrisH48

I'm pretty sure that there is around 990 years left on the lease - I think it was only created when this building was converted to flats relatively recently.
The situation is further complicated by the fact that only 2 of 7 flats are interested in doing anything about it.. The attitude of the other 5 is why do anything as we have no intention of selling. Most of them don't live in the building and their flats are rented out by agencies - they are probably also thinking why bother? Ill just wait for someone else to pay for it because they want to sell... There is some money in the synch fund so I'm going to look into the possibility of using that to sort this out...


Thanks again.
C

TrickyDicky101

Who owns the management company? Is it owned by the leaseholders?

ChrisH48

No its not owned by the leaseholders - the management company is one that we pay a monthly amount to and they manage the property - at the leaseholders direction.


With most of the owners not living here - there would be no appetite from most owners to have a leaseholder company - some of them have no interest at all as long as the rent is paid...

TrickyDicky101

I fail to understand why your solicitor would recommend the transfer of the freehold to the MC - it should only go to a company owned by those leaseholders paying the OR. Do the flats all have very long 900+ year leases?

What's your Ground Rent each year (and are there any provisions for GR increases)? Note i mean GR and not Service Charge.