Buying a share of freehold flat thats being split further

funkydim

Hi Guys
I have a question about share of freehold (so confusing!).
I am in the process of purchasing a property that is share of freehold, it is split between the 2 flats 50/50.
However, the other freeholder has decided to split his flat into 2, creating a total of 3 flats.
My question is, how does this affect me? The service costs are to be split 3 ways, so i figure thats fine, but will only having 33% of the freehold be an issue? Does his having a majority suddenly make my flat worth less? Can he start doing things without my consent because he is 66% owner?

Thanks in advance.

SmashedAvacado

You still own 50% of the freehold unless you agreed otherwise.
he probably didnt have a right to split his flats.
Did he speak to you about any of this in advance?

funkydim

he had started this process prior to my offer (and we havent even exchanged yet), so I assume it was all agreed a while ago.
So being lumped with it if I proceed with the purchase, my questions remains, is it ok to have a minority of a share of freehold? Or should i run for the hills?

davidmcn

funkydim wrote: »

he had started this process prior to my offer (and we havent even exchanged yet), so I assume it was all agreed a while ago.
So being lumped with it if I proceed with the purchase, my questions remains, is it ok to have a minority of a share of freehold? Or should i run for the hills?

It's (obviously) pretty normal if a block has more than two flats in it, so you'd always have the risk of being outvoted. And if you both had 50% of the votes, how would you resolve deadlocks?

AdrianC

funkydim wrote: »

I have a question about share of freehold (so confusing!).
I am in the process of purchasing a property that is share of freehold, it is split between the 2 flats 50/50.
However, the other freeholder has decided to split his flat into 2, creating a total of 3 flats.
My question is, how does this affect me? The service costs are to be split 3 ways, so i figure thats fine, but will only having 33% of the freehold be an issue? Does his having a majority suddenly make my flat worth less? Can he start doing things without my consent because he is 66% owner?

You're buying two things.
You're buying a leasehold flat, and you're buying a proportion of the freehold. Let's say that's a straight 50%.

If your neighbour (and fellow freeholder) wants to develop his leasehold flat into two doesn't affect your lease at all. As freeholders, you and your neighbour together need to issue new leases.


Your neighbour also owns two things - that leasehold flat, and a 50% share of the freehold. He can decide whether to split his 50% of the freehold into two 25% shares, or just keep it as one single 50% in his ownership. He cannot in any way dilute YOUR 50% without you agreeing - that would require a third share being issued, taking your 50% to 33%, in effect by taking the 100% to 150%.

Think of it as a cake. You have one slice. He has one slice. He can cut his slice in two, but he cannot make your slice smaller - although, between you, you could make the total amount of cake bigger.

funkydim

I understand that, but does anyone have any experience with this? Am I getting myself into a situation I should be avoiding?
The garden is being split 3 ways also, although there's only access via my flats side entrance.

AdrianC

Remember, you own just as much of the freehold as your neighbour does. He can do what he likes with his flat - but only insofar as the lease allows him. Anything else needs you to come to an agreement as freeholders. He can do NOTHING to anything that belongs to your leasehold flat.

G_M

You have not exchanged yet, so presumably the current owner and the other freeholder have discussed (and agreed?) what his plans are. But perhaps not. So the possibilities are

1) It's already been agreed by them to split the freehold into 3 equal shares, and you will buy one of them. The garden will be split into 3, and you will have rights to 1 of the 3 via your lease (which is presumably being re-written to reflect this).

So you need to see

a) exactly what the lease you are buying says (ie what area of property and garden you get) and
b) exactly what % of the freehold you are buying


2) It's already been agreed by them to split the freehold into 3 unequal shares,the 50% you will get and two 25% shares, one of which he will sell.


So again, you need to see exactly what is being offered in the sale to you.



3) nothing has been agreed yet. You will be buyng the existing lease and the existing (50%) of the freehold. Again, you need to read that lease.

It is likely that once you own you will have to negotiate with the other freeholder to agree his plans. He may or may not be cooperative, or may try to 'bulldozer' his plans through.

You could (should?) keep your 50% of the freehold and let him divide his 50% into to 25% shares.

And you could (depending what your current lease says, keep 50% of the garden (if that's what the current lease provides) and make him split his half of the garden into two.

If you were to agree to divide everything (freehold, garden, maintenance costs etc) into equal 1/3rds, then I suggest you should charge him for this as

a) you would be losing rights and land and

b) he would be adding value to his share by making it into 2 flats

saajan_12

funkydim wrote: »

Hi Guys
I have a question about share of freehold (so confusing!).
I am in the process of purchasing a property that is share of freehold, it is split between the 2 flats 50/50.- check the current lease: does your seller have the lease on 50% of the garden? is there a share agreement for 50% of the freehold?
However, the other freeholder has decided to split his flat into 2, creating a total of 3 flats. - okay, but if he owns the lease on 1 flat, 50% of the garden and 50% of the freehold, then he can subdivide that into say 25% of the garden and freehold apiece, but cannot takeover part of your seller's garden/freehold without your seller's agreement.
My question is, how does this affect me? The service costs are to be split 3 ways, so i figure thats fine, but will only having 33% of the freehold be an issue? Does his having a majority suddenly make my flat worth less? Can he start doing things without my consent because he is 66% owner? - so will the leases and share of freehold agreement be varied?

Thanks in advance.

Does your seller already owns a lease over 1 flat + 50% of the garden + has a 50% share in the freehold then either you buy exactly that, or you VARY the lease and share of freehold agreement. This cannot happen without the permission of the owner of your flat (ie you / your seller).

If it is all being varied to 33% shares then I'd suggest you reduce your offer to account for the smaller garden, smaller share of freehold (and rights that come with it), and increase for the smaller contribution to service charges. Your seller can refuse to agree to the lease variation until they are paid a similar amount (or whatever they demand) from the neighbouring flat owner.

Remember its all about clarifying what you're buying and then negotiating if that's changed from when you made your offer.

Tom99

[FONT=Verdana, sans-serif]There are so many possible permutations to this.[/FONT]
[FONT=Verdana, sans-serif]The 1[/FONT][FONT=Verdana, sans-serif]st[/FONT][FONT=Verdana, sans-serif] thing is to get to grips with the [/FONT][FONT=Verdana, sans-serif]actual[/FONT][FONT=Verdana, sans-serif] lease you will be buying, does it even exist yet. Then get to grips with exactly what share of the freehold you will be buying and how, joint tenants or via a Ltd Co?[/FONT]
[FONT=Verdana, sans-serif]You probably also need to see the leases of the 2 new flats, or whatever lease is to cover these 2 flats.[/FONT]
[FONT=Verdana, sans-serif]Do all the insurance/service charge %age add up? In creating 2 flats out of 1 flat is an extension involved? Should the contributions be 50%/25%/25% or 33%/33%/33%?[/FONT]
[FONT=Verdana, sans-serif]Unless the documentation, leases, freeholder permission, planning permission etc are already in place this seems like one to avoid unless you are desperate to buy this particular flat. [/FONT]