Share of freehold - letting arrangements

proformance

Hi

We've purchased a share of the freehold in a 2x leasehold arrangement.

I.e. There is one building for which we have a leasehold alongside the upstairs leaseholder.

We were told the property upstairs was tenanted, which is gone, but we were told after we completed that they had a he's tenant coming in (who had apparently paid 6 months upfront).

Just a general query -
1) would other leaseholders typically have any say at all in the tenant selection process for another leaseholder? 
2) if the tenant is anti social or problematic in any way, what recourse does a leaseholder have? Are there any special rights a leaseholder might have?

Many thanks

Z

princeofpounds

No, a leaseholder would not have any say at all in the selection of a tenant by another leaseholder.

A leaseholder has no special recourse about the behaviour of a tenant of another leaseholder. But like anyone, they could complain to the freeholder if there is an issue about the lease being breached.

A freeholder, or co-freeholder, on the other hand may have some sway. That would depend on the terms of the leases, which I'm sure you've read in their entirety (?). It would likely be limited, and limited to permission to let or not let.

Remember that being a co-freeholder is a totally separate matter to being a leaseholder. You have two hats legally - you don't wear both at the same time.

The other issue you have is that with 2 co-freeholders, it is hard to change the status quo, as your co-freeholder can block any action you wish to take.

So overall, co-operation and discussion is the way forward with your co-freeholder.

proformance

We have not seen any "freeholder lease terms".

We're still waiting for be transferred into the Ltd company, but we don't have legal representation to guide us through it. We just thought that by the existing CoSec adding us as shareholders in the Ltd company that is all that would be there - I.e we weren't aware there might be a "freeholder lease"....


On separate note - we're concerned that we are not part of the freehold yet and don't really know how to proceed. 

princeofpounds

There aren't any 'freeholder lease terms'.

There are two leases. One between the flat you own as a leaseholder, and the freehold, which you co-own as a shareholder. The other is between the neighbouring flat and the freehold. They are probably, but not necessarily, exactly the same.

Your influence over letting next door depends on your two hats
1) As a leaseholder of your own flat, it's minimal. Pretty much the same as any flat neighbour.
2) As a co-freeholder, you may have some influence, but that is determined by a) the lease agreement between the freehold and the neighbouring flat and b) the decisions of your co-freeholder - who also happens to be the LL of that flat! - in exercising your joint control over the freehold.

If you have just been buying a share in the freehold then yes, once you are on the shareholder register, that's it. You are a co-freeholder. But with small companies nothing much happens after that unless you make it happen. For example, there's no standing requirement to hold an AGM unless its in the Company charter. You won't be elected as a Director (if you want to be) without an AGM or EGM. 

proformance

Thank you for this extremely insightful reply.

FWIW, the people we bought the property from were (and still are) listed as "directors" and own an equal share distribution in the freehold Ltd.

Aside from my initial question about rights around co-freeholder's tenants, should we be worried that we have not been added to the freehold Ltd company?

The other Co-freeholder did send us an email and asking us:

"I assume as part of the flat purchase that the shares in the freehold co have been transferred to you already?"

But this was not the case. Our conveyancer said that this was not part of the purchase arrangements and no shares were transferred.

Is the transfer the sole responsibility of the Co-freeholder? What happens if they don't initiate this?

Our conveyancer/solicitor has left the firm we used and we don't expect the firm itself to be of any use bow that their responsibility has seemingly ended... 

NameUnavailable

Some leases prohibit any sub letting so check that first. Most require freeholder consent to let (which he probably already has if that's the case).

I expect that you're just worried about a noisey tenant (although any neighbour can be trouble, doesn't matter if they rent or buy).

If there are issues then you have the same courses of redress as anyone else.

princeofpounds

I'm confused why your conveyancer thinks that transfer of the shareholding is not part of the purchase agreement. It's hard to comment without knowing what they actually meant by that. It was never included? That it was just not something they agreed to deal with? Something they are not competent to deal with?

The transfer is the responsibility of the vendor of the shareholding in the freehold, you, and your respective legal representatives.

The registration of your shareholding is the responsibility of the company, the company secretary specifically, IIRC. 

The election of Directors is the responsibility of the General Meeting of shareholders.

proformance

We as the buyers never explicitly asked what the process was and just trusted that we would just be added to the freehold Ltd. It was only after we had the call to confirm completion did it dawn on me that I hadn't signed anything relating to Companies House and I asked the solicitor what the process is?

He said "I asked about share transfer and it was rejected by the seller's solicitors" and that "the contract as signed it was binding" and that any arrangements about co-freeholding would happen after and separately.

There was an LPE1 that was signed by both the old owner and Co-freeholder, which we were led to believe was the initiation of share transfer etc...

Very confusing... 

princeofpounds

OK, so at the moment it sounds like the share in the freehold was never sold to you. Which is... unfortunate. Do you have any contact details for the vendors, have they expressed any intention to actually sell this to you? (It doesn't have great worth to them).

proformance

princeofpounds said:

OK, so at the moment it sounds like the share in the freehold was never sold to you. Which is... unfortunate. Do you have any contact details for the vendors, have they expressed any intention to actually sell this to you? (It doesn't have great worth to them).

Yeah - they are being extremely helpful and were the ones who initiated contact with the co-freeholder asking for the transfer. The co-freeholder has responded to said email chain and said "I will add you as directors of the company". Then went on to say "I assume as part of the flat purchase that the shares in the freehold co have been transferred to you already?". 

It's the second part of this email that reads uncomfortably... As this is not the case.. 

Also worth noting that said co-freeholder is a corporate lawyer so we remain hopeful of a fair process here (or indeed the exact opposite!)... 

Alter_ego

proformance said:

Hi

We've purchased a share of the freehold in a 2x leasehold arrangement.

So it seems you haven't purchased a share of freehold.  Did the freeholder agree to sell it or was it just a leaseholder?