Share of freehold dilemma

willposkett

Hi there,

I am really confused, hope you can help.

I live in a building with two flats.

I am buying share of Freehold, with the soon to be new owner of the downstairs flat. I have lived in the upstairs flat as owner/occupier for 5yrs. Downstairs was owned and rented out by the person now selling the flat and in turn the freehold (to myself and the new buyer). Questions are...

-Downstairs is getting the share of freehold for free/included in sale price. Whereas i am having to pay £5k. Reading around i got the impression they cannot do this, and have to charge both parities the same? As the downstairs buyer has simply got the freehold included (and its not expressed as £5k wrapped in) doesnt that mean its effectively free, and should be the same for me here too? What are my rights here?

-my current leasehold is 130yrs and ground rent is £100. Downstairs has negotiated 999yrs and peppecorn rent. With share of freehold we will both freeholders & leasholders, so will want to change my terms to be as good downstairs. Can i force them to change my leasehold now as part of this process? (they are currently doing the paperwork).

Btw my leverage is they are desperate to sell (in a chain) so i will refuse to sign transfer of freehold till, these terms have been met.

Thanks!

eddddy

Unfortunately, it sounds like you're in a very poor negotiating position.

Normally, all the leaseholders would get a "Right of First Refusal" when the freehold is sold - but I don't think that applies here, because your freeholder lives in the building.

See: https://www.lease-advice.org/advice-guide/right-first-refusal/

Without the "Right of First Refusal", you have no real leverage.


The freeholder can charge you whatever they like and whatever terms they like - they don't have to be the same terms as the downstairs flat. Your best bet is probably to negotiate with your freeholder to try to get a 999 year lease with zero ground rent.

If you can't reach agreement - the freeholder can just sell 100% of the freehold to the person downstairs, or sell a 50% share to the person downstairs and keep the other 50% share for themselves. So you'd be completely shut out.


Maybe contact Lease Advice to check whether you have the "Right of First Refusal" because that would strengthen your bargaining position a lot. You can arrange a free call here: https://clients.lease-advice.org/




Edit to add...

TBH - sounds a bit odd that the freeholder won't give you a 999 year lease with zero ground rent.

I don't really think that the buyer downstairs is going to care too much about getting £50 per year from you (i.e. 50% of your £100 ground rent)

...or be too excited about the idea of getting 50% of a lease extension price in 50 years time.

willposkett

Hey there, thank you for response, really appreciate it!

Here are some extra bits, from what i understand. Would love your further thoughts.

-I do have Right of First Refusal, as i am the existing leaseholder and owner/occupier. They had to offer it to me first, before the incoming buyer, of the downstairs flat. I have checked this and this is the case.

-The freeholder owns the downstairs flat (which they are selling) but have never lived in it. They rented it for like 10+yrs and it has remained empty for the last 3/4months.

-I guess at this moment in time, myself (leaseholder with right of first refusal) and incoming buyer are in different categories. The latter does not get right of first refusal. Because we are in different 'states' they can charge us different fees? That is downstairs for free (inc in purchase price), i pay £2k. And they can do this?

-once i become share of freehold it will be fairly easy/cheaper to extend my lease and remove ground rent no? As its 50/50 split it would be hard for the other share of freeholder to block it, i thnk?

Thanks again. Really appreciate it!

willposkett

ps i found this on of the links you sent

"However the landlord cannot sell or offer the interest to another party on different terms or at a lower price than that originally offered within 12 months of his notice, unless he again offers the Right to the existing tenants on the new terms and/or at the lower figure""

Would this not apply to my situation.

user1977

willposkett said:

That is downstairs for free (inc in purchase price), i pay £2k. And they can do this?

Why are you so certain that it's "free"? It's presumably part of their contract that they're getting it as part of the price, but I'm not aware of any principle that they need to apportion the price between the leasehold and freehold (or tell you how they've done that). Do you think they'd pay the same if they weren't getting the freehold?

willposkett

user1977 said:

willposkett said:

That is downstairs for free (inc in purchase price), i pay £2k. And they can do this?

Why are you so certain that it's "free"? It's presumably part of their contract that they're getting it as part of the price, but I'm not aware of any principle that they need to apportion the price between the leasehold and freehold (or tell you how they've done that). Do you think they'd pay the same if they weren't getting the freehold?

Ah this is great. Thank you.

I was accidentally included on a long email thread between the freehold seller and the buyer of downstairs. There exact wording was  " we will include half of the freehold with the sale of the property; she is selling the other half to the occupier of the flat above".

Maybe there is no legal stipulation saying that they have to spell out of the cost of £2k being wrapped into the purchase price? In my mind i was wondering if, because, it was included it was technically free/non comparable.

NameUnavailable

You said in the OP your cost was £5K and now it's £2K?

You really don't want to try and 'block' anything or you'll probably end up losing out. I would however ask your solicitor to agree a new 999 year lease and peppercorn ground rent to avoid any problems down the line.

starving_artist

eddddy said:

Normally, all the leaseholders would get a "Right of First Refusal" when the freehold is sold - but I don't think that applies here, because your freeholder lives in the building.

See: https://www.lease-advice.org/advice-guide/right-first-refusal/


If you can't reach agreement - the freeholder can just sell 100% of the freehold to the person downstairs, or sell a 50% share to the person downstairs and keep the other 50% share for themselves. So you'd be completely shut out.

This.  RFR does not apply where there are only two flats and the other flat is owned by the freeholder.  It's a specific exception in the legislation.  Your freeholder might not be aware of the exception so you might get away with it but it is a risk.

eddddy

starving_artist said:

eddddy said:

Normally, all the leaseholders would get a "Right of First Refusal" when the freehold is sold - but I don't think that applies here, because your freeholder lives in the building.

See: https://www.lease-advice.org/advice-guide/right-first-refusal/


If you can't reach agreement - the freeholder can just sell 100% of the freehold to the person downstairs, or sell a 50% share to the person downstairs and keep the other 50% share for themselves. So you'd be completely shut out.

This.  RFR does not apply where there are only two flats and the other flat is owned by the freeholder.  It's a specific exception in the legislation.  Your freeholder might not be aware of the exception so you might get away with it but it is a risk.

Actually... I think I was wrong in this case.

As LEASE says, it's a requirement that:

• the landlord genuinely lives in the building as his only or principal residence and has done so for more than 12 months.

Link: https://www.lease-advice.org/advice-guide/right-first-refusal/

 The OP says the freeholder's flat was rented out and has since been empty for 4/5 months. So RFR should apply.

starving_artist

I could be wrong but I think you need a majority of qualifying leaseholders to exercise the right and in this case one flat = 50%?  I would actually check it out with an adviser at LEASE rather than just what it says on the website because the legislation is full of tricksy clauses.  If you do please come back and tell us!