Share of freehold flat - split

TranceNRG

Hello ladies and gents,
Since you have been very helpful with previous queries, I thought I'd get your advice on another issue.

I'm in the process of buying a 2 bed ground floor flat and it comes with a share of the freehold (shared with 1st floor flat). I got an email from the conveyancing solicitors this week regarding the split. This is an excerpt.


That’s correct you will be buying the flat from the seller as well as the share of the freehold. We would recommend a declaration of trust to declare how the freehold is split. We can do this and our fees for this is £125 + VAT. At the moment from the title it looks like the freehold is split between the two leaseholders equally, but just to be on the safe side and for the future we would recommend the declaration of trust.

I haven't seen the titles or anything but I was under the impression that I owned the ground floor flat and garden with the front yard and entrance shared.

Is it a good idea to get a declaration of trust to declare how the freehold is split? 125 pounds for a piece of paper sounds excessive to me but these are solicitors we are talking about!
If this saves me hassle in the future then I'm happy to pay for it. But if there's no point doing it and all the other share of freehold flats are like this, then I'd rather not spend extra money on something I don't need.

What are your thoughts on this?

cheers.

AlexMac

I'm no lawyer (hopefully one will add their expertise) but have bought and sold three 'shared freehold' flats and also once, a Victorian house which had been converted into two flats where I owned the freehold of both and the basement owner was a leaseholder.
I share your suspicions about lawyers who want to sell you an expensive piece of paper "just to be on the safe side " so I would ask them to inform you on a few more basic questions first, as you are a a bit uninformed (or mis-informed?) about so called 'shared freeholds'.

In each purchase, my solicitor examined and reported to me on both the lease as well as the land registry 'title' to clarify who owned what. So IMHO you should be asking what the lease says before rushing to buy a 'declaration of trust' (which presumably the other shared freehold owner will have to agree to?).
In each of my purchases the lease was the document which clarified what I was buying, with a clear plan showing my 'redlined' exclusive areas, any communal, and defined my rights of access to these. Together with the 'title' it defined ownership of the overall freehold building and grounds. In each case individual flats were 'leasehold' (usually very long leases) with the freehold being owned by a formally constituted 'non-profit' Company made up of members, directors or shareholders (the leaseholders). Being a 'Limited Company' also absolved individuals from liability in the unlikely event anyone tried to sue us! We acted collectively as a freehold Company to manage and fund overall stuff like buildings insurance or claims, maintenance, decoration and lighting in communal areas (all of which responsibilities were defined in the lease), and in effect, gave ourselves individual leases over each flat.

So the question for you, is - who is the freeholder (presumably you and the other flat leaseholder?), is this a constituted Company or is it ad-hoc, and what does the lease say? And if the lease is incompetent or incomplete, what's wrong with it that needs a new legal document?

TranceNRG

AlexMac wrote: »

I'm no lawyer (hopefully one will add their expertise) but have bought and sold three 'shared freehold' flats and also once, a Victorian house which had been converted into two flats where I owned the freehold of both and the basement owner was a leaseholder.
I share your suspicions about lawyers who want to sell you an expensive piece of paper "just to be on the safe side " so I would ask them to inform you on a few more basic questions first, as you are a a bit uninformed (or mis-informed?) about so called 'shared freeholds'.

In each purchase, my solicitor examined and reported to me on both the lease as well as the land registry 'title' to clarify who owned what. So IMHO you should be asking what the lease says before rushing to buy a 'declaration of trust' (which presumably the other shared freehold owner will have to agree to?).
In each of my purchases the lease was the document which clarified what I was buying, with a clear plan showing my 'redlined' exclusive areas, any communal, and defined my rights of access to these. Together with the 'title' it defined ownership of the overall freehold building and grounds. In each case individual flats were 'leasehold' (usually very long leases) with the freehold being owned by a formally constituted 'non-profit' Company made up of members, directors or shareholders (the leaseholders). Being a 'Limited Company' also absolved individuals from liability in the unlikely event anyone tried to sue us! We acted collectively as a freehold Company to manage and fund overall stuff like buildings insurance or claims, maintenance, decoration and lighting in communal areas (all of which responsibilities were defined in the lease), and in effect, gave ourselves individual leases over each flat.

So the question for you, is - who is the freeholder (presumably you and the other flat leaseholder?), is this a constituted Company or is it ad-hoc, and what does the lease say? And if the lease is incompetent or incomplete, what's wrong with it that needs a new legal document?

There's no separate company/entity. 1st floor flat and ground floor flat holders collectively own the share hold. I guess what the solicitors are saying is the split is not clear whether it's 50/50 or 60/40 or whatever (I think they are talking about the communal areas like front yard and entrance hall)
But my suspicion is this is normal for all share of freehold flats and this expensive piece of document isn't necessary. And as you said the other freeholder (the owner of 1st floor flat) lives in NZ and he'd need to sign this document which he might be reluctant to.

G_M

The freehold is not limited to the 'communal areas'. It applies to the entire building and the land on which it sits (including the garden.)

Each lease then grants the leaseholder a right to occupy some part of the building for a period of time - think of a normal AST tenancy: the landlord still owns the property but the tenant is allowed to live in it for 6 months or whatever. The difference is that with a lease the period of time is longer, the upfront cost greater, but the 'rent' is nominal eg £100 a year.

At the moment from the title it looks like the freehold is split between the two leaseholders equally, but....

You need to get this explained. Is the solicitor saying
* he has not yet fully checked so is not sure - in which case he needs to check & then tell you or
* he has checked but the documents are unclear - in which case what is the ambiguity?

TranceNRG

I haven't seen the lease or the freehold titles so I am not sure. But my understand is that ground floor flat privately owns ground floor and the back garden.

Doesn't the lease specify which areas you own/lease? Or does the freehold also specify this?

thanks.

G_M

Each lease specifies what the lease comprises. eg the ground floor lease will comprise the area of the ground floor flat (and garden?) as outlined on the attached Plan (usually outlined in red).

But that does not mean "privately owns ground floor and the back garden." It means they have a LEASE to those areas (ie the right to occupy for x years). The areas are still owned by the freeholder (who in this case comprises two people) .

Your issue here, though, does not seem to relate to the lease at all. It is the freehold that your solicitor is talking about, and the share of ownership of it.

TranceNRG

OK so does the freehold say what parts of the building you own? In a normal 'share of freehold' situation, is the split written in to the freehold? Sorry all these legal things are new to me.

Richard_Webster

The reason most people don't have a deedd of trust in this situation is that they don't they'll ever need it - until something goes wrong.

£125 is quite cheap to avoid possible problems int he future.

If you jointly own the freehold with someone else what happens when you want to sell your flat? You can transfer the leasehold interest to your buyer but you need the signature of the other co-freeholder to transfer your "share" of freehold to your buyer.

There is no law that says that the other freeholder has to sign - and what happens if he has his flat repossessed by his mortgage lender or has just disappeared? A properly drawn deed of trust can get round that kind of difficulty.

TranceNRG

Cheers Richard.

You made a good point. So for whatever if my relationship with the other co-freeholder wasn't good and if I wanted to sell the house, he could refuse to sign meaning I won't be able to sell the flat in the future?

Are there any other issues that can arise not having deed of trust for the share of freehold?

125+ VAT isn't a lot if it's going to save me trouble in the future.

But what if the other co freeholder refuses to sign the deed of trust for whatever reason? Then I will have wasted that money right?

I might have to get my solicitor to query seller's solicitor first whether the co freeholder would be happy to sign this document.

G_M

TranceNRG wrote: »

Cheers Richard.

You made a good point. So for whatever if my relationship with the other co-freeholder wasn't good or he just went abroad and couldn't be contacted etc and if I wanted to sell the house, he could refuse to sign meaning I won't be able to sell the flat in the future?
As Richard said, you could sell the lease, but not the freehold share.

Are there any other issues that can arise not having deed of trust for the share of freehold?

125+ VAT isn't a lot if it's going to save me trouble in the future.

But what if the other co freeholder refuses to sign the deed of trust for whatever reason? Then I will have wasted that money right?

I might have to get my solicitor to query seller's solicitor first whether the co freeholder would be happy to sign this document.

Obviously you get agreement in principle from the other freeholder before drawing up the Deed and presenting it to him. Yes, he might change his mind but that is a small risk.

TranceNRG

So I sent an email to the solicitor querying about the ambiguity in the split. She said as far as they know there's no declaration of trust specifying the split.

And if they draw up a new one that's not going to get around the issue of having to get the other co-freeholders signature when I want to transfer my share of freehold in the future (during sale).

So not sure if it's worth spending that money on a piece of paper that might not do anything.