Should I buy a flat with freehold to the whole building?

catblackberrywine

Hi everyone, I'm looking at a property which seems complicated to be in terms of the freehold and wondered if I could have some advice please.

It's a 4 storey building, split into 2 properties. The current owner of the flat/duplex I am seeing owns the freehold to the whole building. I don't want to be solely responsible for maintaining the whole building. Apparently the owners both share responsibility for maintenance now but I don't know yet if this is written down in a legal document anywhere.

Are there any specific questions I should ask the agent and my solicitor?

nicmyles

Presuming the other flat is leasehold, you could ask to see a copy of their lease - that is where responsibility for maintenance etc would be written down. You should also ask for details of ground rent and service charges paid by the other flat. Presumably there is also a lease applying to your flat? The two should mirror.

You should be aware as the freeholder that you (depending on what the leases say) are likely to need to organise and administer buildings insurance, any sinking fund (money built up to pay for repairs etc) and major repairs/maintenance. However, you can reclaim partial costs from the other flat.

If you're not keen to do those things and have to ask for money from your neighbour etc, it may not be the right property. You could also, once you buy, offer to sell them a share of freehold so these responsibilities become shared, but either way a lot will depend on who the other owner is, how responsive and co-operative they are, etc. It would be easier to enforce them doing things as the sole freeholder rather than sharing it.

Dannii75

I had a freehold flat & whilst it was nice not paying a management company we did pay a monthly sinking fund which also paid for the buildings insurance. I'm OK with that. What I didn't appreciate was the emergency funds I needed when the roof needed replacing. Also, when the other tenant wanted the front of the driveway spruced up I went halves, it was because she was selling up. These things cost me many hundreds each time without warning because the sinking fund wasn't built up enough. So just beware of that. I felt like someone else had control over my savings which I didn't like. So freehold was not for me. I'm sure other people don't have the same experience as me so it's not all doom & gloom. 

NameUnavailable

You need to read the lease (ideally both of them) to determine what the freeholder is responsible for. Usually it's the buildings insurance and maintenance to the actual building and any common parts (gardens included unless demised to individual flats).

The lease will almost certainly state that all costs are shared in proportion.

Owning the freehold is a bonus IMHO. You get to decide what is done and when (although you do need to adhere to anything set out in the lease, i.e. if it says the communal hallway must be decorated every 5 years then that's what you should do).

catblackberrywine

Thank you everyone! My solicitor will go through the lease. It is more complicated than just being leasehold, but without the cost of service charge and no say in how it is spent.

GTG

You may be on a sticky wicket in regards to building insurance and repairs. My solicitor informed me that only the owner of the building can insure it. Therefore, you must ensure that there are clauses in the leases that place this obligation on the freeholders and clauses giving the freeholder the right to be compensated from the leaseholders for this expense. In the type of arrangement you describe it is essential that you get on with you neighbours in order to maintain the building correctly and this does not guarantee that e.g. suppose the roof is directly above your flat/duplex and it or leaking gutters require repairing and your neighbour drags his or her heels on the repair work or loses his or her job and can't afford it. Include here drug addiction, marriage break up or any other reason some people go off the rails. The water ingress will affect your home probably to the extent that you will just have to bite the bullet and pay for the repair to avoid any extra damage to the inside of your property or threats to you health in the hope that you will recoup the cost from your neighbour. If he or she refuses then unless the repair bill is substantial it will probably not be worth the cost of pursuing it with a solicitor. The same if you are on the ground floor and the damp proof course fails. Apply this to any other common parts of the building that will fail that will affect you and not your neighbour.     

eddddy

GTG said:

You may be on a sticky wicket in regards to building insurance and repairs. My solicitor informed me that only the owner of the building can insure it. Therefore, you must ensure that there are clauses in the leases that place this obligation on the freeholders and clauses giving the freeholder the right to be compensated from the leaseholders for this expense.

Those are such fundamental lease terms, it's very unlikely that any lease would be written without them.

But if a lease had been written like that, it would be classed as a 'defective lease', the flats wouldn't be mortgageable, and your conveyancing solicitor would highlight it.

And if a lease really was that defective, a freeholder or leaseholder could apply to a tribunal for a compulsory lease variation.

GTG said:

In the type of arrangement you describe it is essential that you get on with you neighbours in order to maintain the building correctly and this does not guarantee that e.g. suppose the roof is directly above your flat/duplex and it or leaking gutters require repairing and your neighbour drags his or her heels on the repair work or loses his or her job and can't afford it. Include here drug addiction, marriage break up or any other reason some people go off the rails. The water ingress will affect your home probably to the extent that you will just have to bite the bullet and pay for the repair to avoid any extra damage to the inside of your property or threats to you health in the hope that you will recoup the cost from your neighbour. If he or she refuses then unless the repair bill is substantial it will probably not be worth the cost of pursuing it with a solicitor. The same if you are on the ground floor and the damp proof course fails. Apply this to any other common parts of the building that will fail that will affect you and not your neighbour.     

Most flat leases don't work in the way you describe.

(It sounds like you might be describing a more unusual 'maisonette-type' lease, - maybe from the perspective of a leaseholder, rather than from the perspective of a freeholder.)


In a more typical flat lease, a leaking roof and leaking gutter are usually the freeholder's responsibility (so it would be the OP who has to fix them).

The freeholder (i.e. the OP) would issue Service Charge demands to the other leaseholder to get 50% of the cost back.

If the freeholder (i.e. the OP) follows the legal processes correctly - the power is stacked hugely in the freeholder's favour. For example, the freeholder (i.e. the OP) can repossess the other leaseholder's flat, if they don't pay the Service Charge.


But the problem is the legal processes can be very complex and fiddly, and a novice freeholder can easily get them wrong - and then end up hugely out of pocket.

GTG

Those are such fundamental lease terms, it's very unlikely that any lease would be written without them.

I know of at least 44 in my neighbour hood without these fundamental lease terms! Don't underestimate how many there are out there, especially very old leases.

But if a lease had been written like that, it would be classed as a 'defective lease', the flats wouldn't be mortgageable, and your conveyancing solicitor would highlight it.

I know of "defective leases" having been missed by conveyancing solicitors on flats like these and they sell with mortgages with contingent buildings indemnity insurance in place.

And if a lease really was that defective, a freeholder or leaseholder could apply to a tribunal for a compulsory lease variation.

There are rules on the percentage of leaseholders that need to be onboard with the variation before the tribunal would consider it. In the case of two leaseholders it is very likely that both would have to agree to it.  

Most flat leases don't work in the way you describe.

I would say "most" is probably the operative word.

(It sounds like you might be describing a more unusual 'maisonette-type' lease, - maybe from the perspective of a leaseholder, rather than from the perspective of a freeholder.)

I am sure the OP wants to filter out the "unusual" leases and the ones that work in the way I describe. The limited information the OP provides about the building  makes me think that the leases are of the "maisonette type".

In a more typical flat lease, a leaking roof and leaking gutter are usually the freeholder's responsibility (so it would be the OP who has to fix them).

I would say "usually" is the operative word.

The freeholder (i.e. the OP) would issue Service Charge demands to the other leaseholder to get 50% of the cost back.

Providing they are not "unusual" leases. 

If the freeholder (i.e. the OP) follows the legal processes correctly - the power is stacked hugely in the freeholder's favour. For example, the freeholder (i.e. the OP) can repossess the other leaseholder's flat, if they don't pay the Service Charge.

Forfeiture is a rarity and not a process to endure for someone that just wants a place to live, please reference your comment below.

But the problem is the legal processes can be very complex and fiddly, and a novice freeholder can easily get them wrong - and then end up hugely out of pocket.

Not to mention the possible legal obligations of the freeholder in terms of Section 20 works. I think most people just want a hassle free place to live and prefer to pay a service charge. However, as you probably know there are no guarantees there either if you select a development with a dodgy management company. 

 

ThisIsWeird

In a situation with only two Leasehold properties, the Freehold being owned by just one - you - is almost certainly the best overall situation.
With, instead, two Leaseholds and a separate FHer, you need a conscientious FHer who will sort issues quickly, get three quotes for big jobs, and act with integrity and not self-interest. 
Or, with the FH being owned by both LHers (usually set up as a Ltd Co), you can have a stalemate situation with some decisions as there's no overall majority.
You owning the FH should not cost either of you any more than with having a separate FHer, and actually gives you the opportunity for making savings as the power to determine the work required, and choose the best contractors, is all yours.
It comes with responsibilities, certainly, but all manageable. Ask Q's such as the current maintenance and service contributions. They should also, I understand, be able to show you the minutes from past meetings - that'll give you an excellent idea of how well it was run, and how you should continue to do so!
Soon after you have bought, have a meeting with the other LHer, and discuss things like the jobs that need doing, the level of regular maintenance funds, the amount in the sink fund, etc. You make these decisions together, but you have the final say.
Really, it's the best of the overall options. 

eddddy

 This is probably heading off down a rabbit hole, way beyond the scope of the OP's original question...

GTG said:

There are rules on the percentage of leaseholders that need to be onboard with the variation before the tribunal would consider it. In the case of two leaseholders it is very likely that both would have to agree to it.  

No - you introduced the topic of a defective lease, with no provision to recover insurance costs (and maybe no provision to recover repair costs).

That only requires an application from one party - typically the freeholder - for a compulsory lease variation.

It's covered by Section 40 and Section 35 of the Landlord and Tenant Act.

(I think you're talking about other types of lease variations which are covered by Section 37 of the Landlord and Tenant Act. They require support of 75% of leaseholders.)

GTG said:

I know of at least 44 in my neighbour hood without these fundamental lease terms! Don't underestimate how many there are out there, especially very old leases.

So any leaseholder or the freeholder should apply for  compulsory lease variation - as described above.

GTG said:

Forfeiture is a rarity and not a process to endure for someone that just wants a place to live, please reference your comment below.

It's rare because leaseholders pay their service charges, rather than face forfeiture.

If any leaseholder seeks advice from any reputable organisation, they will always be told to pay their service charge.






But overall, I agree with your sentiment that the OP (and some other posters) don't seem to understand the  responsibilities and risks of becoming a freeholder.

If the other leaseholder is reasonable, cooperative, honest and knowledgeable - maybe the 2 of them can 'muddle through' and make it work.

But if the other leaseholder is difficult, and/or dishonest and/or clueless - it could turn into a complete nightmare for both parties.

(And even if the other leaseholder is a 'good person', they might sell to  a new leaseholder who is a 'bad person'.)

NameUnavailable

Without getting into the minutae of lease terms, IF you own the freehold and IF there was some urgent repair needed and IF the other party (leaseholder) said they couldn't pay towards the work at least you are in a position to proceed and do it anyway and then recover your costs later.

You are in control and not reliant on a third party to say if and when they'll do work or who they'll choose to do it!