Share of freehold - letting arrangements

proformance

Alter_ego said:

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?

The MOA and (still published estate agency listing) states "share of freehold"... 

HampshireH

What does your actual paperwork say from the purchase

What the EA said in the advert is irrelevant

proformance

HampshireH said:

What does your actual paperwork say from the purchase

What the EA said in the advert is irrelevant

Which paperwork though? We don't have anything that officially says "share of freehold c, because for whatever reason the conveyancer seems to have completely missed the step and not bothered (accidentally or intentionally) to ensure that this sale as as such... 

princeofpounds

OK. First thing - is the freehold held directly or through a company? It seems to be held through a company given everything you have suggested.

Then, get hold of the articles of association of that company (Companies House download). If you are lucky, it will have a clause saying something like 'holding shares requires ownership of a leasehold dwelling and any transfer of a leasehold dwelling must also transfer the shareholding'.

However, this is not essential as long as you retain the co-operation of the vendor.

The actual mechanics of selling the share from the vendor to you I am not sure about, as I'm only familiar with the process for large public companies. However, essentially what is needed is a stock (or share) transfer form. That's basically them signing their shareholding over to you - it's a pretty basic document.

Given this is for such an important asset (more for the future saleability of your flat than actual monetary value), it's probably best if you get advice on this. You need to get certain things right, around consideration and stamp. There is a link below that discusses it a bit, and if you google 'J30 form' I think that's the standard kind of template that tends to be used.

If I were you, I would consult a solicitor who DOES deal with these and ask their advice on how much it would cost to clean up the situation. It shouldn't be too expensive, it is not hard work if you know the process.

https://www.gov.uk/tax-buy-shares/use-a-stock-transfer-form

HampshireH

You would normally have had an increased selling price for a share of the freehold. Was it valued to consider this?

The transfer deed would have been done as part of the sale. It seems it wasn't so you didn't purchase a share of the freehold when you purchased your leasehold.


The relevant transfer documents would be co-signed by all freeholders. So the other freeholder would know if they signed anything.

proformance

Spoken with the co-freeholder and he's advised the previous owners need to execute a stock transfer (via some form) and resign as directors of the company.

We will then be added as directors in their place.

Thankfully nothing untoward afoot, as of yet!

Many thanks

Z

proformance

princeofpounds said:

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. 

Revisiting this and my original question - so the only influence I have as a co-freeholder (1 of 2) is theoretical? I can merely express my views to the other co-freeholder about their tenants, but don't have any practical sway?

WRT this point - "a) the lease agreement between the freehold" - is this a contract that I can/should be able to see anywhere as the co-freeholder? I.e. I take it you man the co-freeholder's lease arrangement to the freehold, which I assume can be different to ours?

princeofpounds

So typically many leasehold properties have a provision in their lease that subletting of the properties is only permissible with permission of the freeholder. Sometimes there is no restriction, sometimes there are other restrictions. That's why I say it depends on the lease.

This is of course a very blunt tool, and attempting to use it may antagonise your neighbouring leaseholder who is also your co-freeholder.

That lease is a document that should be available to you as a co-freeholder, as it is a contract between the freehold and your neighbouring leaseholder. Even if it is not supplied to you, it should be registered at the land registry and available for a modest fee. It is very likely to be identical to your own lease, as it is probable that both leases were set up at the same time on the same terms.

Where it becomes more theoretical is that your neighbouring leaseholder can block any actions that you propose at freehold level, because there are two of your. So if you wanted to remove permission, he can block it. Even if subletting is prohibited, he can block you enforcing that clause. So in reality he can do largely what he likes.

And why shouldn't he? Most people don't get a veto over their neighbours.

proformance

princeofpounds said:

So typically many leasehold properties have a provision in their lease that subletting of the properties is only permissible with permission of the freeholder. Sometimes there is no restriction, sometimes there are other restrictions. That's why I say it depends on the lease.

This is of course a very blunt tool, and attempting to use it may antagonise your neighbouring leaseholder who is also your co-freeholder.

That lease is a document that should be available to you as a co-freeholder, as it is a contract between the freehold and your neighbouring leaseholder. Even if it is not supplied to you, it should be registered at the land registry and available for a modest fee. It is very likely to be identical to your own lease, as it is probable that both leases were set up at the same time on the same terms.

Where it becomes more theoretical is that your neighbouring leaseholder can block any actions that you propose at freehold level, because there are two of your. So if you wanted to remove permission, he can block it. Even if subletting is prohibited, he can block you enforcing that clause. So in reality he can do largely what he likes.

And why shouldn't he? Most people don't get a veto over their neighbours.

I agree with your sentiment, I am just curious. Not every neighbour is nice and thus I just wanted to be prepared.

Regarding the lease between the leaseholder and the freeholder - would the particulars of which be in a document called LPE1/2 by any chance?

Thanks,

Z

princeofpounds

proformance said:

Regarding the lease between the leaseholder and the freeholder - would the particulars of which be in a document called LPE1/2 by any chance?

No, although the LPE1 will contain some information about what is in the lease. Those are forms containing standard enquiries to freeholders/leaseholders when making a property transaction. LPE1 is basically the core of the 'management pack'. The lease is the lease. 

To highlight the difference - the lease will tell you that you have to pay a service charge, and what works qualify for it. The LPE1 contains details on e.g. how much was charged in practice in recent times.