Share of freehold uneven split possible?

jjxzhang

I'm interested in a flat which is two stories (first and second) of a three story terraced house. The property is being sold as share of freehold and when we viewed the property and asked about expected fees e.g. sinking fund and building insurance, they mentioned that the costs would be split 2/3 and 1/3 as the other share of freehold only has one floor as opposed to this flat's two floors.

I'm going to ask the estate agent as to whether the share of freehold is also split 2/3 + 1/3, but does anyone have insight as to what I should be expecting? In my mind I'd expect a 2/3 + 1/3 split if we would be having to pay for 2/3 of any repairs that may need to be done in the future, but would be happy to be wrong if someone had a good explanation as to why it would be 50/50?

Thanks in advance!

eddddy

What difference are you hoping it will make if it's a 2/3 vs 1/3 as opposed to a 50/50 split?

(For example, is there development potential, lease extension revenue potential, ground rent payments?)


It probably depends on how much of the purchase money each leaseholder contributed when the freehold was bought...

• If they each put up 50% of the money - then I guess they'd own 50% each.
• If one put up 90% of the money, and the other put up 10% of the money - then I guess it would be a 90/10 split.

etc

(But it could be more complicated than that, if the 2 leaseholders had different length leases when they bought the freehold.)

jjxzhang

What difference are you hoping it will make if it's a 2/3 vs 1/3 as opposed to a 50/50 split?

Honestly? No idea! My partner asked me the exact same question and I didn't have an answer then, and I haven't come up with an answer yet.

I'm a FTB so very new to the world in all of this. Am I right in thinking that there's no real difference if the freehold is 50/50 or 66/33? I guess in my mind the fact we'd be paying two-thirds of any costs I'd want two-thirds of what I'm paying for.

I guess it's a bit of me overanalysing it to be honest, there's no room for development and the ground floor flat holds the other share of freehold so I suspect if you started trying to charge a bunch for lease extension or increase ground rent then it'd come right back at you the next time you needed to do anything.

user1977

If the whole property is subject to ultra-long leases with negligible ground rent (is it?) then the freehold is worth virtually nothing, so how you split it seems academic.

eddddy

I suspect it's 50/50.

(e.g. if the freehold cost £20k - each leaseholder paid £10k)


As I suggested, the split might make a difference if the freeholders 'own' the garden or the loft etc

• And the upstairs flat wants to 'buy' the loft for a loft conversion
• Or the downstairs flat wants to 'buy' part of the garden for an extension

Or if the flats have uneven lease lengths - and people want to do lease extensions.


It would also determine how the ground rent is split - but maybe that's not very much anyway.

kingstreet

You need to examine your lease for your share of repair and improvement costs.

eddddy

jjxzhang said:

The property is being sold as share of freehold and when we viewed the property and asked about expected fees e.g. sinking fund and building insurance, they mentioned that the costs would be split 2/3 and 1/3 as the other share of freehold only has one floor as opposed to this flat's two floors.

Just to add - in the set up you describe, I would see a sinking fund as a bad idea.

The potential risks and drawbacks are much greater than any benefit.

If you (and the other flat owner) want a 'repairs fund',each of you should just open your own savings account in your own name.


That's much easier than a 'sinking fund' which would involve setting up and managing a joint account with a stranger -  and deciding who has passwords to access the joint account online, who has debit cards on the joint account, what to do when the other person uses their debit card to pay for their holiday, etc.

AdrianC

jjxzhang said:

I'm interested in a flat which is two stories (first and second) of a three story terraced house. The property is being sold as share of freehold and when we viewed the property and asked about expected fees e.g. sinking fund and building insurance, they mentioned that the costs would be split 2/3 and 1/3 as the other share of freehold only has one floor as opposed to this flat's two floors.

I'm going to ask the estate agent as to whether the share of freehold is also split 2/3 + 1/3, but does anyone have insight as to what I should be expecting? In my mind I'd expect a 2/3 + 1/3 split if we would be having to pay for 2/3 of any repairs that may need to be done in the future, but would be happy to be wrong if someone had a good explanation as to why it would be 50/50?

Go back a step and ignore the freehold for a moment. Think just about the leasehold situation.

You are buying the lease of 2/3 of the building. Is it fair you pay 2/3 of the maintenance of the building? Yes, it is.

OK, so if the freehold was owned by two completely different people, would you expect it to be owned in random proportions?

So why are you tying the freehold ownership proportions to the leasehold ownership proportions?

If it was 2:1, the other owner would have no say in management - they would be constantly outvoted by you.

jjxzhang

Thanks everyone, the estate agent has confirmed that it's a 50/50 split for the freehold.

@AdrianC: I think this is where my logic went faulty, I wasn't differentiating the freehold title from the leasehold and assigning more value to the freehold than there actually is.

I agree that 2/3 is the fair share of the repair costs - the lease is for 2/3 of the building so why shouldn't it be (I believe the loft is part of the demise, while the garden is part of the ground floor flat's demise as well)?

Thank you all for your responses, they've quietened down the voice in the back of my head that was saying "check every little thing" when spending the most I've ever thought of spending.