Buying a flat with the freehold of the whole building

IRememberItWell

We've seen a ground floor flat suitable for our own occupation; it also includes the freehold of the whole Victorian house, which has two more flats above. In order to avoid hassle could we pass the administration to a management company? Would the consent of the two other owners be required?

Comments greatly appreciated on the above together with any thoughts regarding advantages and disadvantages of such a purchase.

IRIW

Guest101

Are you sure it's not 'share of freehold' ?


I would expect the freehold to sell for quite a lot more than a leased property

eddddy

If you own the freehold, there's usually no problem with using a management company to manage the property.

Except very occasionally, leases don't allow management co fees to be charged to leaseholders. Ask your solicitor to check the leases for this.

Assuming the leases allow it, you don't need any further consent from the other leaseholders.

But they might grumble at you a lot, if they now have to pay a higher service charge each year. Where there's only 3 flats in a building, leaseholders sometimes choose to manage stuff more informally amongst themselves - to keep service charges down. How are things managed currently?

elverson

eddddy wrote: »

Where there's only 3 flats in a building, leaseholders sometimes choose to manage stuff more informally amongst themselves - to keep service charges down. How are things managed currently?

Even if it's done 'informally' like this, there is usually a management company which owns the entire building, and the leaseholders are the shareholders of the company. This makes it easier for things like buildings insurance.

KiKi

elverson wrote: »

Even if it's done 'informally' like this, there is usually a management company which owns the entire building, and the leaseholders are the shareholders of the company. This makes it easier for things like buildings insurance.

Not necessarily 'usually' - I've never been in that arrangement where there were just 2 or 3 of us. We've always managed it informally, and most friends (I live in Brighton where there are huge numbers of converted Victorian terraces!) are in the same situation.

IRememberItWell

Thanks for the replies so far.
I'm seeking clarification and will report back.
IRIW

IRememberItWell

Well, it's not just 'share of freehold': the owner of the flat in question does indeed own the freehold of the whole house. We've asked whether there's a 'no-sub-letting clause' in the existing leases and are awaiting clarification. (We would not want sub-letting to be possible.) The other flats are owner-occupied and these people have been there for some many years. The leases are getting low and I guess they will need to be extended. But how much clout does a freeholder have with respect to leases? Presumably the existing leases are set in stone but could we insist on a clause in any new leases that rules out sub-letting?
(BTW, thanks for the comments on management companies - we would not go down that road but let things remain 'in house' as they currently are.)
With many thanks in advance.
IRIW

eddddy

IRememberItWell wrote: »

The leases are getting low and I guess they will need to be extended. But how much clout does a freeholder have with respect to leases? Presumably the existing leases are set in stone but could we insist on a clause in any new leases that rules out sub-letting?

Statutory lease extensions wouldn't allow you to change an terms in the leases (e.g. clauses about sub-letting.)

If you negotiate informal lease extensions with leaseholders - the freeholders and leaseholders can agree any changes to the lease that they like.

But prohibiting sub-letting would probably reduce the value of the flats. So I would expect the leaseholders' solicitors' to advise their clients not to agree (and to go for a statutory extension instead).

IRememberItWell

Thanks very much "eddddy" for your prompt reply. In fact, we've just heard that the existing leases do indeed preclude sub-letting. I note your comment about the value of the flats being reduced if there is a 'no-sub-letting clause'. On the other hand, we've come across a fair number of flats where sub-letting is not permitted: as this would be our main residence such a situation is ideal. Guess there will be others with the same view.
IRIW

Sewing_Bee

Hello there, we bought a ground floor Victorian flat with the freehold for the whole building (3 flats in total). The previous owner did not do anything to maintain the building apart from emergency bodge repairs and buy the building insurance each year.

Before we bought it, we downloaded a copy of the top two floors leases from the Land Registry at £3 each and saw that the upstairs flats HAD to have carpets, not play the piano after 11:30pm and contribute 1/3 each towards shared expenses. The ground rent is set at peppercorn rents and the leases have already been extended for over 100 years so we can't cash in that way. But the lease does allow us as freeholder to claim reasonable costs for managing the building.

My experience as a leaseholder of managing agents was that the work was a long time to organise and charges were extortionate (health and safety audit of a path leading up to the front door and communal hallway costing almost £1,000, putting up a no smoking sign in the hallway £300).

We have been managing the maintenance of our new house by ourselves for the last year and keep our neighbours informed of any works planned (repairing guttering, repainting outside of house, installing outside lighting), issuing section 20 notices with different quotes where necessary. We also shopped around for buildings insurance and got the same cover for 40% less and the saving was shared by all the flats. We have been called once by the top flat for a leak in the roof but we called a local roofer who fixed it in a week.

As yet we have not made a separate charge for arranging these services, it has been quite straightforward and I like having positive relationships with our neighbours more than a couple of hundred pounds. Might that change in the future? It could do. When one flat sold we did charge for completing the paperwork.

My experience? Freeholds are great and there is lots of information online for you to know how to fulfil your obligations as freeholder and avoid any potential pitfalls. But get yourself a good solicitor who has experience of this area and listen to their advice!

AlexMac

Don't immediately jump into the arms of a managing agent; after all, while you may feel inexperienced now, it's not rocket science being a freeholder. I bought into the arrangement you describe but have also been a director in three small shared freeholds. As a result, we had the lowest service-charges in the manor, the most cost-effective maintenance of communal stuff like external decorations & roof repairs, and most importantly, control. I acted as treasurer in a couple of them, and because they were Limited Companies, and we didn't need an accountant or auditors, I had to do basic accounts and file annual returns to Companies House, which again, is something you learn.

An agent will only be in it for the fees, not to provide excellent service, cheap service-charges or peace of mind. I'm sure there are honest agents out there, but there are probably some who rack up admin fees every time they write a letter, pick up the phone or commission a repair; and as it's not their money they don't care how much the repair costs... Not that I am accusing anyone of giving overpriced fixit jobs to favoured contractors!

So maybe a silver lining?