Buying a leasehold flat with share of freehold - no management company

deece1

Hi, I am looking to purchase a leasehold flat with a share of the freehold (25% four flats) but there is no management company in place. It is my first time buying a leasehold flat so I have very little knowledge. The property is a large Victorian house that was bought and turned into flats 4 years ago. The four flats were sold just over two years ago. so the property still looks good on the inside and out.  The estate agent said there is no management company in place but who pays for the buildings insurance and if the roof needs repairing or the communal area needs painting or someone starts parking in my designated parking spot? The estate agent said to the best of his knowledge the property is lived in by the four people who bought the flats but what happens if they have been rented out and those people refuse to pay towards any communal area costs?

I have already had one property fall through and I don't want to end up in the same situation again. I have two children and work and I don't want to end up managing the property. Is it worth pursuing the property? Many thanks.

 

eddddy

A 'share of freehold' can sometimes be great - or it can sometimes be a disaster.

Essentially, 4 of you will be jointly responsible for things like:

• Repairing and maintaining the building
• Insuring the building
• Generally managing the building
• Enforcing covenants in the lease
• Doing accounts and collecting service charge money
• Extending leases
• Taking non-payers to court
• Producing LPE1 forms, answering solicitor's enquires etc

If your co-owners are honest, fair, sensible, have similar views on building maintenance to you, and are prepared to put the effort into doing the things in the list above - that's great.

If your co-owners are not honest, not fair, and are maybe a bit lazy - and they have strange ideas about how to manage and maintain a building - it could be a nightmare.


And bear in mind that even if the current joint freeholders are ok - one or two or three of them could sell up, and be replaced by 'fools'.


And it would be helpful if there was a legally enforceable agreement about how decisions are made etc...  For example,

• If all 4 freeholders think the roof should be repaired - that's great.
• If 3 think the roof should be repaired and one doesn't - do you go with the majority?
• But what if 2 think the roof should be repaired and 2 don't?

LAD917

If you're looking at small conversions, keep in mind that management companies can be rather pricey when the cost is only divided by a small number of units. It's often hard to justify the cost, especially when virtually all management companies have poor reviews. (Just read this board....)

I've lived in self-managed buildings, and the experience depends heavily on your neighbours.  I will say this: expect to get to know your neighbours quite well.  You will likely be expected to pitch in, and it can become a time suck if the building needs repairs.  In the situation I was in, it was always the absentee landlord who was insistent that everything needed to be triple-bid, etc., which meant someone (often me) had to stay home from work, try to find builders willing to take on a small job, deal with builders who didn't show up, etc.  I also ran all of the financials, paid all of the bills, and worked with the accountant on the tax forms - probably a few hours per months, gratis.  But it was better than the alternative, which was having to pay my share of late and delinquency fees and living in a building that wasn't in basic compliance with the laws for freehold companies.

If you're lucky, you'll have some sucker like me running everything for free.  If you're unlucky, you'll walk into a situation like I did (but it was worth it for a one-of-a-kind, architecturally distinct flat that I loved)/

If you have an accepted offer, someone (one of the Directors) will need to prepare the equivalent of a management pack for you. Your solicitor can probably get a sense from that how well run (or not) the building is. Mine told me to run screaming. By the time the next person sold, the story was quite different.

eddddy

LAD917 said:

...especially when virtually all management companies have poor reviews. (Just read this board....)

Ummm... I think the implication behind that statement is a bit extreme!

Bear in mind that people only post on these boards when they have a problem. They wouldn't post to say "my management company just gets on with the job, and I have no complaints".

The same with reviews posted on review sites.

I have dealt with a number of management companies, and I've discussed many management companies with BTL landlords. There are generally no major problems.


I've only ever come across one 'problematic' and unreasonable management company. But to be fair, the leaseholder was thoroughly obnoxious and had really wound-up the management company - so it had become a 'personal war' between the leaseholder and management co.

 

NameUnavailable

Management companies won't usually take on 'small' properties, or if they do the costs will be high.

I guess the current arrangement is that the 4 leaseholders get together when work is required to agree on who to use and what to do. It keeps costs down but can sometimes mean that maintenance is always reactive rather than pro-active, this can mean gradual decline of the property and larger bills down the line!

Much will depend on what happens currently but yes the risk is that future owners don't play ball.

If someone lets a flat out they (the leaseholder) will still be liable for the maintenance costs, not their tenants. They may not be interested in paying for upkeep of a property they don't live in, seeing any outgoings as eating into their lettings profits. Again, a false economy.

Assuming the place looks well kept, I wouldn't be put off, just be prepared to get involved with things and help with getting quotes for work etc.

canaldumidi

As above, the advantage is no management company costs, and hands-on involvement in decision-making. With cooperation, this can work well.

The disadvantages are the risk of becoming the only shareholder who's interested so you end up doing everything, or disagreements about what should be done.

My advice is to knock on 3 doors and get a feel for who your joint freeholders are going to be! Of course, as pointed out, they might sell later resulting in completely different people sharing the freehold, but at least you can avoid walking into an immediately poor set up.

another_casualty

Lots of good advice above . @edddy seems the most straightforward explanation.

Example ; my brother lives in a share of freehold .3 One bedroom flats.
He is the share of freeholder living in his flat the longest . 
The other 2 are owned from various BTL landlords .
My brother and the previous landlords managed to buy the feeehild , so there are no serviccharges l
The 3 of the share of freeholders do agree on the annual buildings insurance split 3 ways 
However, getting them all to agree on essential repairs that need doing is another thing.
You may find that other share of freeholders have the poor mouth when it comes to important things that need doing and that they want to pay the least for bodge jobs with no guarantees .Thankfully my brother worked in the building trade for many years so is thankfully able to convince one of the share of freeholders the sensible route avoiding paying cheap paying twice
2-1 is unanimous so the three of them have to pay the same regardless  . 

 With a leasehold flat with no share of freehold, obviously there is gd rent and service charges. Hopefully with a sinking fund which hopefully should cushion the blow for any works that need doing .