Share of freehold: 3 flats, 5 people

FouRou

We found ourselves in a pretty weird situation. We live in a flat in a converted Victorian house; There are 3 flats in total - ground, first and top floors. It's Share of freehold.

In 2022 there was 1 person in the top floor flat, 1 person on the first floor and 2 people on the ground floor (4 in total).

We (me and my partner) bought the first floor flat in 2022.

Now, our neighbours from the ground floor decided to sell their flat to another couple. They found out that back in 2022 Freehold Title Register was transferred solely to us. So only me and my partner are registered owners of the freehold of the property (the other 3 people are not in there). I'm not sure how this has happened, trying to chase the solicitors. All 5 people are still under section 10 in Declaration of trust. 

The problem is that we are told - there could be no more than 4 people on the register. But, in fact, there are five of us (1 - top floor, 2 - first floor, 2 ground floor). Ground floor neighbours insist one of us (me or my partner) gives up the space on the register for the new buyers because they are an unmarried couple.

I'm not that proficient in property law, but it feels like it can hit back to us. 

What are our options? I guess in the long term, it's creating an LTD company so that the limitation of 4 people is gone. But in the near term, how dangerous is it for us to just leave one of our names on the freehold title?

eddddy

So what happens if you (or your other neighbour) wants to sell to an unmarried couple as well?

Will the new couple that you mention end up with 50% ownership of the freehold between them? (So, for example, if there's development potential, they get 50% of the 'profit'?)

How will that impact their voting rights? Will the new couple that you mention get 2 out of 4 voting rights?

It would be far simpler and fairer to just have 3 owners of the freehold - i.e. each leaseholder nominates one person.


The unmarried couple can make their own arrangements / agreements about what happens if they separate, one dies, etc. 

FouRou

Yes, completely agree. 
I'd propose to go for either LTD or 1 person per flat route.

It seems that what they propose is:
1/3 of freehold is on person from top flat
1/3 on a person from our flat
1/3 on two people from the ground floor flat

So 1/3 remains, but as for voting, the ground floor flat would have 2, whereas everyone else has one. And I can imagine that would create issues if there are disputes. As you say - 2 out of 4.

And yes, I'm also concerned that because they are unmarried that actually makes things even harder (for us) in case they separate. 

BarelySentientAI

If you make a LTD company, you would have the same problem with unequal voting though.

If I was in a share of freehold between three properties, I would expect that each property had 1/3 voting.  Not depending on how many people live there.

FouRou

All five people can be directors, and in this case, both our and the ground flat will have two. So it's not fair to the top-floor flat. If they are against it, I'm happy to do just one per flat.
Ultimately, I'm up for any option that doesn't discriminate against us, and I want to be reasonable towards the neighbours selling the flat. I know it's stressful, and I'm happy to assist, but not to the detriment of myself. 

DullGreyGuy

In the last flat we rented and considered buying the freeholder was a limited company that the leaseholders who partook in the buyout setup. Each unit was allocated 6 shares for the leaseholders to divide amongst themselves and each share came with 1 vote so...

Person living alone - 6 shares/votes
Couple - 3 shares/votes each
3 friends sharing or a couple with parental support - 2 shares/votes each

Ultimately no matter how you do it there will become a problem at some point but the fundamental of it is that each unit gets the same number of votes irrespective the number of people in it. In practice there will be a bit of an advantage to those with multiple people as they have more chances of persuading others to their cause but at the same time someone living on their own may be an expert negotiator and so win over more despite being just one person.