change from leasehold to share of freehold

resilie

Looking for some advice about the pros and cons of changing my leasehold flat to a share of freehold.
It's one of 4 flats in a converted Victorian building. The freeholder is not a professional landlord nor does he use a management company. He's inherited the house and converted it into flats, living in one of them until very recently. A very nice guy but somewhat overwhelmed with the management tasks so he has floated the idea of moving to share of freehold to share the load. That would suit me to an extent as I would have control over such things such as which building insurance is taken out (and make sure it is done in a timely fashion).
On the other hand I am worried about potential costs should some major repairs should come up.
Management fees are relatively small, so is ground rent and lease has another 120 years to run.
So pros and cons guys?

eddddy

The term "share of freehold" means:

• You would continue to own the leasehold of your flat.

• You and your 3 neighbours would be clubbing together to jointly buy the freehold of the building.

So the 4 of you would have to find a way of agreeing how to insure, repair and maintain the building.

So for example, you have to think about...

• What if the 4 of you each prefer a different insurance company? How do you decide which one to go with?

• What if one of the 4 refuses to pay their share of the insurance premium? What will you do?

• What if the roof is leaking, and 2 of the 4 don't care and won't pay to get it fixed?

• And/or somebody wants a quick, cheap roof repair, whilst somebody else wants half the roof replaced?
• And/or somebody wants their brother-in-law's roofing firm to do the job, whilst somebody else doesn't?

cattie

[QUOTE=resilie;7579712
On the other hand I am worried about potential costs should some major repairs should come up.
Management fees are relatively small, so is ground rent and lease has another 120 years to run.
So pros and cons guys?[/QUOTE]

It might be down to the freeholder to arrange for any necessary works to be carried out, but whether you own share of freehold or not, should any major works be needed you would be liable for a share as such costs are paid by leaseholders.

Socajam

I would much prefer to be a freeholder than having a leasehold.
If for some reason you wish to sell later on, it's better for you
Find out how much the freehold will be and sit down with all the other homeowners.
If everyone agrees, it would make sense to create a (limited company) not sure if this is the correct way and open a bank account to deposit money into monthly for major expenses - all external work, insurance etc.
This would mean that everyone would have to be on board.
If this is agreed, make sure that every check must be signed by 2 signatures.
You will need to have monthly meetings to go the accounts - this can just be 1 hour per month.
It's a lot to think about, but if all is in agreement it could prove to be very advantageous for all. (you will need to seek legal advice).

eddddy

I guess it's also worth mentioning that if your 3 neighbours aren't interested in jointly buying the freehold with you, you could buy it by yourself.

Then you could decide on insurance, repairs, maintenance etc - as long as you abided by the terms of the leases.

And you'd then take on all the responsibilities of being a freeholder.

Soundgirlrocks

Socajam wrote: »

If everyone agrees, it would make sense to create a (limited company) not sure if this is the correct way and open a bank account to deposit money into monthly for major expenses - all external work, insurance etc.
This would mean that everyone would have to be on board.
If this is agreed, make sure that every check must be signed by 2 signatures.
You will need to have monthly meetings to go the accounts - this can just be 1 hour per month.
It's a lot to think about, but if all is in agreement it could prove to be very advantageous for all. (you will need to seek legal advice).

A limited residents management company is the way it needs to be set up, the company is dormant so its fairly straightforward. I would advise getting all the leases amended to 999 years and insert a clause to link the share in the company with the leasehold (prevents someone selling their flat but forgetting to transfer their share in the freehold)

You don't need to meet monthly (bit excessive) I run a black of 7 flats, the only thing I would say be cautious that the burden of doing everything doesn't fall onto just one person. We use a managing agent, who pays all the running costs and collects the service charge and we meet once a year for an AGM to discuss bigger issues.

Big advantage we can pick our suppliers, we still need to do section 20 for any major works (again relatively straight forward)

Socajam

Soundgirlrocks wrote: »

A limited residents management company is the way it needs to be set up, the company is dormant so its fairly straightforward. I would advise getting all the leases amended to 999 years and insert a clause to link the share in the company with the leasehold (prevents someone selling their flat but forgetting to transfer their share in the freehold)

You don't need to meet monthly (bit excessive) I run a black of 7 flats, the only thing I would say be cautious that the burden of doing everything doesn't fall onto just one person. We use a managing agent, who pays all the running costs and collects the service charge and we meet once a year for an AGM to discuss bigger issues.
Big advantage we can pick our suppliers, we still need to do section 20 for any major works (again relatively straight forward)

999 seems a good idea, would make the property more attractive when it comes to selling.
Management company costs money. Also they would need to monitor the management company. I would not go completely blind and think the management company would have 100% of my interest to heart.
Even when one invests money in the stock market, they take the time to check their investments.
30- 60 minutes meeting once a month is not too excessive if they are managing the property themselves
This is true as they would have more control over how work gets done.
Also as you said, one person may end up doing all the work which can be burdensome over time.

Soundgirlrocks

Socajam wrote: »

Management company costs money. Also they would need to monitor the management company. I would not go completely blind and think the management company would have 100% of my interest to heart.
Even when one invests money in the stock market, they take the time to check their investments.
30- 60 minutes meeting once a month is not too excessive if they are managing the property themselves
This is true as they would have more control over how work gets done.
Also as you said, one person may end up doing all the work which can be burdensome over time.

The management agent is an employee of the Residents Management Company, and as such yes need some monitoring but it does take to burden off dealing with the day today admin and helping us to stay on the right side of the law. Ours is excellent but quite bespoke in that the cater for small blocks that just want help with the admin.

Trust me trying to get everyone together once a year once for an AGM is hard enough, once a month would be a nightmare. You would be amazed at how lax peoples attitudes can be. I don't regret being heavily involved with our building but the truth is I got a bargain because the building had been badly looked after by the residents management company before I bought my flat and took over as sole director (no one else wanted to do it). Would still opt for a building with a share of freehold above a separate freeholder.

resilie

thanks everyone for your replies...the main attraction of getting more involved lies in the fact that the current freeholder isn't professional and doesn't really know what he his doing (don't get me wrong, he is a lovely guy but not very organised at all). He had a friend who used to manage it for him who sadly passed away and he's had a lot on his plate personally as well. So I want to have more control as I am worried he will one day forget to renew the insurance/not get the right one etc... he's also pretty clueless about repairs etc and would likely just go with the first offer given to him...anyway, thanks for the input...I might look into buying the whole freehold off him as sitting down once a month or even getting him to once a year might be too much to ask... (he is super chaotic)

eddddy

resilie wrote: »

I might look into buying the whole freehold off him as sitting down once a month or even getting him to once a year might be too much to ask...

The freeholder will have to give the leaseholders as a group the 'right of first refusal', before he can sell it to you.

So you can only buy it if the other leaseholders aren't interested in buying as a group.

bouicca21

Share of freehold is great in principle but in practice it depends on the leaseholders working together as a team. One difficult person can turn it into major hassle. I’m actually quite glad not to have share of freehold for my building as it means my bully neighbour bullies the management company instead of me.