Share of Freehold and Section 5?

Joanthebone

I wonder if anyone can clarify things for me?

I have put my flat on the market, its in a block of 4 and I have a share of freehold. We do not, as yet, have a company formed.

I have been told by a solicitor that I have to issue a Section 5 notice to the other freeholders, to give them the right to buy my share of the freehold. I cannot understand why I would have to do this. I have lived in the flat for 5 years and have just moved into a house with my new husband. One of the other flats was sold in the last two years and the owner had moved out months before he sold, I never received a Section 5 from him. I have been up half the night, worrying and trying to find out more online, I am so confused right now!

AnotherJoe

This says your solicitor is incorrect

Joanthebone

Thank you Another Joe, I did read that, but it was not clear to me if its just one of those conditions or if I have to comply with more, the solicitor told me its because I am not living there.

Sorry if I am being thick, I am just so stressed out what with moving, etc.....

AnotherJoe

Well, IANAL so looks like you need a second opinion.
Makes no sense to me, how could people ever sell a flat along with share of the freehold if other freeholders can buy the freehold? I can see the sense if you sold freehold separately.

Soundgirlrocks

Doesn't seem right to me either, our residents management company has it written in the articles of association that the shares in that company can only be owned by leaseholders (one share per flat) That is a fairly standard set up.

How is the ownership of the freehold structured? It should be owned by a company that you then each have a 1/5th share of but its possible that isn't the case which is why this has come up.

Joanthebone

Hi, thanks, there are four flats each has a long lease and share of freehold. We do not have a company set up right now, we are in the process of employing a new management company and they will set one up. It does seem weird to me, I would not want one of the other freeholders to buy my share and make decisions for the whole building as they would then have a majority. I also don't want to have to move back in!

Soundgirlrocks

Joanthebone wrote: »

We do not have a company set up right now, we are in the process of employing a new management company and they will set one up.

That is your problem. Worth downloading the freehold title from land registry to double check this is defiantly the set up

The current structure is that 4 people own x presumably as tenants in common with a 25% share each. To sell your share means a change in the ownership of the freehold, and the Landlord and Tenant Act 1987, makes it a criminal offence for freeholders to sell the freehold to a third party without having first offered it to the qualifying flat owners, which is why your solicitor has raised the section 5 issue.

Ideally the freehold should be owned by a company (which is then its own legal entity) so when you sell your leasehold property you are just transferring the share in the company to the new leaseholder, the owner of the freehold doesn't change.

I would get the company set up and the freehold transferred into its name before trying to sell as it will just cause more headaches further down the line. Why it didn't come up when your neighbour sold I don't know but it is possible he retained his share in the freehold, which is going to need correcting as well....

Joanthebone

Soundgirlrocks, my neighbour did sell his flat with a share of the freehold, the current owner has a share of freehold. When he sold the three of us each had to sign a transfer form.

eddddy

Soundgirlrocks wrote: »

I would get the company set up and the freehold transferred into its name before trying to sell as it will just cause more headaches further down the line.

... except that transferring the freehold from 4 individuals to a company would probably also require Section 5 notices to be served.

So that might introduce similar risks and delays.

But it would remove future problems.

Fire_Fox

Joanthebone wrote: »

I wonder if anyone can clarify things for me?

I have put my flat on the market, its in a block of 4 and I have a share of freehold. We do not, as yet, have a company formed.

I have been told by a solicitor that I have to issue a Section 5 notice to the other freeholders, to give them the right to buy my share of the freehold. I cannot understand why I would have to do this. I have lived in the flat for 5 years and have just moved into a house with my new husband. One of the other flats was sold in the last two years and the owner had moved out months before he sold, I never received a Section 5 from him. I have been up half the night, worrying and trying to find out more online, I am so confused right now!

Terminology is important, from legal documents or the Leasehold Advisory Service website or Land Registry not from estate agents particulars. I am not clear what you did or do have in place.

Share of freehold usually means all the leaseholders have a stake in all of the freehold property not, say, a quarter each with four separate titles. What name(s) are on the title and your buildings insurance policy?

Joanthebone wrote: »

Hi, thanks, there are four flats each has a long lease and share of freehold. We do not have a company set up right now, we are in the process of employing a new management company and they will set one up. It does seem weird to me, I would not want one of the other freeholders to buy my share and make decisions for the whole building as they would then have a majority. I also don't want to have to move back in!

You each have two 'hats' you are each a leaseholder and you are each a freeholder. They are technically separate (but linked). I *think* your solicitor is saying you personally (freeholder hat) have to give the others (leaseholder hats) the right to buy under collective enfranchisement.

They can buy together OR nominate a person or organisation or let you sell to someone else. Previously you all (freeholder hats) accepted your old neighbour selling to the new neighbour.

It seem wierd to me too and *may* be down to interpretation of the legislation. But there may be room for interpretation because your ownership/ management situation is a mess.

Joanthebone wrote: »

Soundgirlrocks, my neighbour did sell his flat with a share of the freehold, the current owner has a share of freehold. When he sold the three of us each had to sign a transfer form.

Are you using the same solicitor? Did they definitely know your old neighbour had a new address? Did the building have a managing agent or caretaker then? Does your current solicitor specialise in leasehold?

IMO if you do not have a managing agent nor a caretaker nor a residents management company in place you are not in a position to sell. You would need a cash buyer willing to take a punt.

A buyer's solicitor will put questions to the freeholder or their agent as regards accounts, service charges, debts and liabilities, ground rent, buildings insurance, etc. You have nobody to answer these legal queries, nobody to deal with maintenance or emergencies.

Crack on with sorting out the mess with the ownership/ management situation. You probably need a solicitor specialising in leasehold to do that; paying a middle man (managing agent) a fee/ percentage to organise legal paperwork could be just increasing the cost and slowing the process needlessly.