Share of Freehold (Flat Purchase) Right of First Refusal

SpaceMan

My solicitor has responded saying all flats, other than the flat of the vendor are "qualifying tenants".

See Section 3 'Qualifying Tenants' of the legislation. Sorry, this site won't let me post a link (yet).

SpaceMan

Just spoke to the estate agent who is selling the property for the vendor. She was very surprised to hear of this situation given that she has sold many flats in multi-tenant converted houses (3+ flats) where a share of the freehold was sold with the flat, and never has this legal matter come to the fore where all other tenants in the building needed to be offered the portion of the freehold that was being sold by the vendor, before being allowed to be sold to the flat purchaser.

It's certainly news to me, and this is why I thought many others would have experience of this given how many flats up and down the country get sold with a share of freehold. I thought this would be common knowledge!

In which case - why me?!

Tom99

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SpaceMan wrote: »

Thank you, Tom. I have sent to my solicitor.
I am assuming that the vendor's flat is excluded from this, as presumably they couldn't serve notice to themselves.
If so, the question comes down to is Flat 1 (as current co-freeholder) classed as a qualifying tenant. They are of course a leaseholder, but also own a share of the freehold already.

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SpaceMan wrote: »

My solicitor has responded saying all flats, other than the flat of the vendor are "qualifying tenants".
See Section 3 'Qualifying Tenants' of the legislation. .

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[FONT=Verdana, sans-serif]I don't see why Flat 3 should be excluded. The freehold and leasehold interests are quite separate and any other notice the freeholder is obliged to serve, e.g. repairs, has to be to all three flats so why not this notice.[/FONT]
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SpaceMan wrote: »

It's certainly news to me, and this is why I thought many others would have experience of this given how many flats up and down the country get sold with a share of freehold. I thought this would be common knowledge!
In which case - why me?!

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[FONT=Verdana, sans-serif]Yes I agree very odd. There must be thousands of flats sold each week with a share of the freehold, many like this where not all leaseholders have bought a freehold share. If every one of those sales has to go through this process taking months it would be a conveyancing nightmare and surely a problem more widely known about and reported on.[/FONT]
[FONT=Verdana, sans-serif]The spirit of the legislation is to give leaseholders a chance to own a share of the freehold so using the same legislation to take that share of the freehold away again is very odd indeed.[/FONT]

da_rule

What it may be worth doing after this is sitting down with the other freehold owner and setting up a limited company and then transferring the freehold to that limited company. That way on future sales you are selling the leasehold and your shares in the limited company. You are not actually selling the freehold therefore the consultation requirements will not apply.

SpaceMan

[FONT=Verdana, sans-serif]I don't see why Flat 3 should be excluded. The freehold and leasehold interests are quite separate and any other notice the freeholder is obliged to serve, e.g. repairs, has to be to all three flats so why not this notice.[/FONT]

Agree, but even if Flat 3 was included, the notice would be served to the vendor themselves, so I'm not sure how that would benefit me, unless that meant that a portion of the freehold was then allowed to transfer to me as part of the sale. My solicitor has said that the person selling the freehold is not included in the notice.

What it may be worth doing after this is sitting down with the other freehold owner and setting up a limited company and then transferring the freehold to that limited company. That way on future sales you are selling the leasehold and your shares in the limited company. You are not actually selling the freehold therefore the consultation requirements will not apply.

Good point. My solicitor has suggested the same. It would make a lot of sense.

[FONT=Verdana, sans-serif]Yes I agree very odd. There must be thousands of flats sold each week with a share of the freehold, many like this where not all leaseholders have bought a freehold share. If every one of those sales has to go through this process taking months it would be a conveyancing nightmare and surely a problem more widely known about and reported on.[/FONT]

I can only assume that in all those (3+ flat) properties, the freehold was held in a Ltd company structure and so not subject to this law. Unless most conveyancers ignore this issue given the amount of inconvenience it brings (as a friend of mine suggested), although surely this would get publicised and you'd have all those existing tenants asking to reclaim a percentage of the freehold that was sold to the new tenant, which the law allows them to do, up to any length of time after the sale.

If Notice does end up having to be served, then the lynchpin is Flat 1 (current 50% freeholder). If they choose not take up the offer via the Notice, then Flat 2 cannot either, as more than 50% of tenants have to accept the offer, or else it is nullified. The estate agent is going to speak with the vendor, to see if they can get a written agreement from Flat 1 stating that they won't take up the offer, although they won't be contractually obliged not to!

What an awkward situation, and only days away from exchanging contracts. I'm not sure what benefit there is from holding a higher % of a freehold? If someone owns at least 51%, does that give them overriding control of matters relating to the building? e.g. repairs and maintenance.

Tom99

SpaceMan wrote: »

Agree, but even if Flat 3 was included, the notice would be served to the vendor themselves, so I'm not sure how that would benefit me, unless that meant that a portion of the freehold was then allowed to transfer to me as part of the sale. My solicitor has said that the person selling the freehold is not included in the notice.

Its not the person selling the freehold you are serving notice on but the leaseholder of flat 3. The fact they are one and the same should not matter. Ask you solicitor which clause in the legislation would prevent a notice being served.

Transfer to a company is a good idea but it will also trigger another right of first refusal.