Addition to share of freehold

Brokenlynx

I currently live in a flat in a house that has been split into four flats.

The tenure is a share of freehold where I am registered as one of the share. There are two other names on the freehold. 

One of the names on the freehold is not currently resident in the UK and has proven difficult to contact.

The owner of one of the flats is not one of the freeholders and wishes to be added. This would make four in the share. 

I understand the main reason against consenting to the additional name on the freehold would probably be an aditional person involved in decision making but are there any other considerations worth taking into account? Should existing freeholders be compensated for the addition of a new freeholder? 

Ground rent is currently peppercorn leases across those in the share sit at about 86 years (I'm aware this needs extending sooner rather than later). 

Feel free to let me know if there's anything I might be missing. 

NameUnavailable

When the leaseholders decided to buy the freehold only 3 out of the 4 agreed and paid for the freehold.

If the leaseholder who owns the flat that doesn't have a share of freehold wants to extend their lease, they will have to pay to do so, the funds being then shared between the freeholders.

If you all agree to sell them a share of the freehold then yes, they would pay a sum in the same way as extending the lease (there are online calculators to give you an idea of the costs of each, but you also need to consider the legal fees as well).

Separately, it will make sense whatever you decide, to extend all the freeholders leases to 999 years - if you don't do this the flats will be difficult to sell and if you don't all agree to do this at the same time I would expect other parties to want payment for a lease extension.

Brokenlynx

Just a,s a further point of clarification given some newer information, would it make sense to just sign in the fourth person into the share of freehold? 

This person owns the flat and has claimed they should be on the title deed as part of the share of freehold and would like to be added. Is it normal for this to happen without any cost to the other existing share of freehold including myself?

I've asked this question on Reddit and the response there is much more along the line of the person should just be added as there's not disadvantage to not adding them 

eddddy

Brokenlynx said:

I've asked this question on Reddit and the response there is much more along the line of the person should just be added as there's not disadvantage to not adding them 

That's nonsense.

• Currently 3 of you jointly own a freehold building. (And 4 people are leasing flats within that building.)

• That freehold building has a "market value". i.e. The 3 of you could sell the freehold building in exchange for a pile of money.

• Let's say the freehold building's market value is £30k. So currently the 3 joint owners of the building each have £10k worth of assets

• If ownership is transferred to 4 joint owners - the 4 joint owners will each have £7.5k worth of assets

• So, to be fair, the new 4th joint owner should pay £2.5k to each of the 3 current joint joiners. (So the new 4th joint owner pays a total of £7.5k)

Things to consider...

• Do you want to get a valuer to value the freehold building? If so, who pays the valuer's fee. (And bear in mind that a valuer might be paid, but then the deal falls through.) 

• There will be a bunch of legal fees to pay. Who will pay those? (There's likely to be multiple solicitors involved to advise the different parties.) Again, legal fees might be paid and then the deal falls through.

You should also take the opportunity for the 4 joint freeholders to sign a Declaration of Trust - that deals with stuff like:

• What if 2 joint freeholders want to repaint the windows, but the other 2 don't?

• What if the roof needs repairing and the 4 joint freeholders have 4 different opinions about how it should be repaired?

• What if one flat owner wants to sell their flat - and 1 or 2 or 3 of the other joint freeholders won't sign the paperwork? (Maybe because they can't be bothered, they're being spiteful, they don't like the person buying the flat, etc.)

propertyrental

A lot depends how/when the freehold was set up. eg

* as nameunavailable suggests f they (3 of them) bought the freehold (from......?). and now the 4th (or his successor) wants in, they should buy in, at an agreed price
* the freehold articles of association specify that all leaseholders become share-holders in the freehold for so long as they retain their lease, but this 4th leaseholder was never granted their share, then that should be remedied and the share granted at no cost (other than legal/administrative?)

Brokenlynx

eddddy said:

Brokenlynx said:

I've asked this question on Reddit and the response there is much more along the line of the person should just be added as there's not disadvantage to not adding them 

....

Things to consider...

• Do you want to get a valuer to value the freehold building? If so, who pays the valuer's fee. (And bear in mind that a valuer might be paid, but then the deal falls through.) 

• There will be a bunch of legal fees to pay. Who will pay those? (There's likely to be multiple solicitors involved to advise the different parties.) Again, legal fees might be paid and then the deal falls through.

You should also take the opportunity for the 4 joint freeholders to sign a Declaration of Trust - that deals with stuff like:

• What if 2 joint freeholders want to repaint the windows, but the other 2 don't?

• What if the roof needs repairing and the 4 joint freeholders have 4 different opinions about how it should be repaired?

• What if one flat owner wants to sell their flat - and 1 or 2 or 3 of the other joint freeholders won't sign the paperwork? (Maybe because they can't be bothered, they're being spiteful, they don't like the person buying the flat, etc.)

Returning back to this post after some time away, thanks for some details in the considerations here. Whilst I've definitely become clued up on the fact the freehold is itself a saleable asset I wasn't aware of some of the issues that can arise from the split interests of those involved. 

This process hasn't begun yet but I guess the declaration of trust will likely be an element that is key to it even though those in the share have been fairly amiable up to this point.

propertyrental said:

A lot depends how/when the freehold was set up. eg

* as nameunavailable suggests f they (3 of them) bought the freehold (from......?). and now the 4th (or his successor) wants in, they should buy in, at an agreed price
* the freehold articles of association specify that all leaseholders become share-holders in the freehold for so long as they retain their lease, but this 4th leaseholder was never granted their share, then that should be remedied and the share granted at no cost (other than legal/administrative?)

I'm not familiar with any articles that suggest the fourth leaseholder becomes a share-holder so long as they retain their lease. As far as I can see in the Land Registry title register they're not listed. That said I'll look at my documentation from the purchase when I'd completed to see if such clauses exist.