Reverse Freehold Reserve Fund

amygill1990

I am a first time buyer purchasing a reverse freehold flat, there is just me (first floor) and the other landlord (ground floor) within the building

My solicitor has asked this morning if i would consider contributing to a reserve fund for repairs to the building

On first look this seems like a great idea and would suit me far better than ad hoc payments for repairs 

However, I am concerned that I need to ensure the funds are protected and only used for what they are proposed for

Also my solicitor seemed to think the landlord wouldn't agree to me having any unspent money I had contributed back when i sell

Has anyone any experience of this? Are there any protected schemes out there for this kind of thing? Is it common practice for any unused funds not to be reimbursed upon sale?

canaldumidi

Not sure what a reverse freehold is - similar to a joint freehold? I vaguely envisage upstairs owning freehold of downstairs and downstairs owning freehold of upstairs, but I don't understand how that works really. Who owns the land?

Anyway

1) open a joint business account in names of both freeholders, with both signitures required to withdraw money

2) it's very unusual for reserve funds to be returned if one leaseholder sells. The whole point is to gradually increase the fund.

amygill1990

canaldumidi said:

Not sure what a reverse freehold is - similar to a joint freehold? I vaguely envisage upstairs owning freehold of downstairs and downstairs owning freehold of upstairs, but I don't understand how that works really. Who owns the land?

Anyway

1) open a joint business account in names of both freeholders, with both signitures required to withdraw money

2) it's very unusual for reserve funds to be returned if one leaseholder sells. The whole point is to gradually increase the fund.

Yep your right downstairs in 'landlord' of upstairs and vice versa
A outside party owns the land but its just peppercorn payments

thats really helpful ill do that, thank you!

eddddy

What do you see as the benefit of a reserve fund arrangement?

For example, perhaps your plan is...

• 2 of you each put £100 per month into a joint account - so you accumulate £2400 per year

Why is that better than...

• You open a personal savings account in your name and put in £100 per month - so you accumulate £1200 per year
• Your neighbour opens a personal savings account in their name and put in £100 per month - so they accumulate £1200 per year

Maybe consider options like:

• Your get into a dispute with your neighbour - they refuse to authorise withdrawals on the joint account. You have lost access to your half of the money. (So your roof is leaking and need urgent repairs. So you have to pay out of your savings, even though your money is sitting in the joint account.)

• Your neighbour sells their flat and moves on - accidentally or purposely forgetting to change signatories on the joint account. You no longer have access to any of the reserve fund money.

• If repairs are required and your neighbour is refusing to pay/co-operate - it's probably easier to take legal action against them to make them pay, than to get a court order allowing you to get funds out of the joint account.