Share of freehold advice

anewgrasshopper

Hello, I am a FTB hoping to find a share of freehold studio/flat.
I saw an affordable one, excellent location but cracks in windows, skirting boards, bubbles in roof (flat roof in a 3 bed converted house). They claim it was an overheating panel and that flat roof was done 5 years ago. The outside wall has damp marks, pipes look a bit meh, and gutter defo needs doing. The front of the house looks a bit tired too.
I had a bad feeling, although I guess it’s better to have a lower mortgage, I wonder how many thousands can cost to fix those issues?
the neighbour downstairs lives in London and their flat has been empty, so wondering if they’d agree to pay or if I’d end up forking out the costs.
What are your experiences/advice please?
The sellers are a retired couple. 5 years ago a retired man gazumped me and I lost £4k, so I am quite wary of stingy people that don’t look after their property. Nevertheless, this time I am adamant to buy perhaps not this one 🤭

eddddy

The lease will tell you what parts of the building you are solely responsible for maintaining, and what parts would be shared responsibility. (Typically, you'd pay for any work that needs doing inside the flat, and the cost of any work on the communal parts of the building would be shared.)

But it's not just the cost that's the issue for repairs to the communal parts. If your joint freeholders are disinterested, don't want to spend any money, etc - it can be very difficult to get stuff done. Ultimately, you might have to take legal action.

That can sometimes be a big problem with 'share of freehold'. You can end up jointly owning a freehold with people who have no understanding of property maintenance and repair, aren't particularly interested, don't wan't to spend money, or maybe have some strange ideas about managing a building.

It's worth asking how decisions are made about maintenance and repairs, what work has been done recently, how much the work cost, etc - to try and judge whether the joint freeholders are competent and sensible.

anewgrasshopper

Thank you for your reply, the other 2 freeholders don’t seem sensible, given the state of the building, it isn’t too bad but bad enough to notice...I am at a loss and wondering if there were any happy endings to cheap investments (with improvements to the building) 😅

eddddy

anewgrasshopper said:

Thank you for your reply, the other 2 freeholders don’t seem sensible, given the state of the building, it isn’t too bad but bad enough to notice...I am at a loss and wondering if there were any happy endings to cheap investments (with improvements to the building) 😅

It's not really a question about cheap investments, it's a question about psychology and strategy.

You will be one of 3 people legally bound by leases. (Essentially, those leases will say things like the outside of the property needs to be maintained and repaired by the 3 of you.)

It sounds like you want to abide by the terms of of the legal agreements, but the other 2 don't want to abide by the terms of the legal agreements.

Do you think that you can persuade the others to abide by those terms? Or are you prepared to take them to court over it?

If not, maybe you need to find another flat where the joint freeholders have mind-sets which are more similar to yours. Or find a flat with a 3rd party freeholder who is more 'professional' in their approach to maintenance and repairs.

anewgrasshopper

I guess I could attempt to persuade them, although it would come to a mental drain cost. I am reading awful stories of people refusing to pay, I think I better go for sensible neighbours, cheap can backfire 😅

gwynlas

You could clearly see the problems with this old building even before employing a surveyor. You would be better off buying in a purpose built well maintained block or if the same isn't readily available in your area then saving more and buying a house. With a flat you will always have service charges as well as ground rent. If the flat comes with a share of freehold  all the better. If you can stretch to a two bed property you will always have the option of renting a room out to help cover costs.

NameUnavailable

A few points to add. If it's shared freehold and there's no service charge or management company you will be saving a lot of money that you'd otherwise be paying a management company just for their 'service' - little of what you pay actually goes on real work, that gets billed separately as 'major works'.

It sounds like as the other party lives away they're probably not minded to worry about the state of teh property, but if you were to take it on, they may be happy to pay their share - you can't tell until you speak to them of course.

However, bearing what I said above in mind, if the property just needs a little TLC it could be less costly even if you did have to pay for all of the work to get it done, than paying a service charges on a managed flat.

I would think about it carefully if you like the place.

bouicca21

Even share of freehold properties sometimes employ a management company.  I know of several local shared freeHold properties.  How well they are run is down to the people who own the freehold.   I’d say that if the place looks shabby and uncared for, then the freeholders don’t care and I’d run a mile.

NameUnavailable

bouicca21 said:

Even share of freehold properties sometimes employ a management company.  I know of several local shared freeHold properties.  How well they are run is down to the people who own the freehold.   I’d say that if the place looks shabby and uncared for, then the freeholders don’t care and I’d run a mile.

Yes of course they do otherwise one or more individuals would have to take on responsibility for dealing with all the various leaseholders.

This case sounds like 2 flats in one house so almost certainly there's no company, just 'pay when something needs doing'. If the vendors are retired and the other leasholder is living away, then it sounds like nobody has the time or energy to sort out works. If the OP feels like taking this on then that's up to them but even if they had to pay 100% of costs to get the place lookng better, it could be beneficial compared to getting into potential service charge nightmares with some of the more aggressive managment co's.

AlexMac

The good news is that it’s a shared freehold; I far prefer this tenure to an absentee freeholder who will generally only be in it for the money, or worse, will appoint an agent who’s only in it for the profit, and who may not be accountable to the leaseholders.

Do as much homework as you can, yourself.  Agents may pretend to ignorance, but at best, there will be

a) a Company made up of the leaseholders, who will all participate enthusiastically,

b) a lease which clearly describes liabilities, including what is down to individual leaseholders and what’s shared; who insures, how costs of insurance maintenance and cyclical repairs are to be shared, service charges…

c) a sinking fund for major future works.

Ultimately, you will only get binding answers to these Q’s and others, such as the following, after your Solicitor has sent off the “Leasehold Property Enquiries” form; Qs such as

d) who the Freeholder is. Once you know their Company name, you can use the Companies House website to check that statutory returns are being filed correctly; these may include accounts, which you can look at, and the entry may even include the Company “Mem & Arts” (Articles of Association) or Constitution; my last one did.

e) if Service Charges and shared costs are all being paid; accounts for recent years

But even before you instruct a solicitor and rack up fees, you can do your own informal check on some of this; I did and walked away from one purchase when I discovered the managing agents were sharks; I rang ‘em up and they refused to talk to me.  A google search revealed an unsuccessful “Right to Manage” attempt by leaseholders who were hacked off at being ripped off.

So ask, apply common sense and don’t be fobbed off by a lazy Estate Agent even though they are reluctant to ask on your behalf for fear of a mis-representation accusation. 

The building issues (leaky gutters, worn paintwork) you describe are mostly trivial- a few grand at most, but the roof might be several grand depending on whether the last recoverring was botched;  And some lenders won’t touch flat roofs and some insurers dislike them/  A flat roof can last 10+ years, but bubbling is bad- so can you trust the vendor’s report?  "Overheating panel" is gibberish;  what's a "panel"  - how did it "overheat"; sounds meaningless jargon to me?

Anyway- if you’re keen, do your homework- buyer beware or caveat emptor as we Latins say!  When I sold my last two Shared Freehold flats I ensured the Agent knew the many plus points and accordingly, we sold at top price because the points above were all really positive- we managed the buildings ourselves, did our own accounts and statutory returns to Companies House, insured it and contacted works ourselves, not via an agent and so, we had the best maintained property in the street, with the lowest Service Charges!

Happy researching

anewgrasshopper