Share of Freehold sale / Section 20 Major Works dilemma

PalmTreeBreeze

Almost 2 years ago I bought my first property, a leasehold 2 bed flat in a Victorian conversion that has 4 flats in total. One Freeholder owns one flat and rents it out. The other Freeholder doesn't own a flat anymore. The other 2 Leaseholder owners are same as me, FTB single females. Management Co are useless, service charge for my flat is £1600 a year, my ground rent is £30 per year. 

Last year we were given a Section 20 Major Works notice that we Leaseholders have tried to push back on as we are pretty sure the person awarded the work is the friend of the management company and his reputation is highly questionable from what we have found out online. We also don't think the scope of work is necessary. The cost is £11k per flat (it was £13k but agreed we can use all the sinking fund) and we simply don't have that money floating around. The Management Co are pushing hard for it to get done and have asked for the whole amount up front.

And 3 months ago the Freeholders offered us the chance to purchase the share of Freehold. After a long time for them to get the valuation done we had the figures and one of the Leaseholders is not willing to go ahead as hers is £7k and mine and the other flat is a few hundred each. That's because our leases are longer and no rising ground rent like hers is. (We haven't had our own survey carried out). So basically the Freeholders have said they can't negotiate the valuation.

So now the Freeholders have said we either press on with the Section 20 and postpone the share of Freehold sale or we press on with the Freehold purchase and postpone the Section 20. Myself and 1 Leaseholder really want to postpone Section 20 and purchase Freehold share so we get control and get shot of the management co and when we need to do the works, we use our own reputable contacts for it. The other says no, lets do the work now as it adds more value to the property than share of freehold does. My worry is management co will massively bump up the service charges for next year.

It's all so stressful and we don't know whats best. Any advice please? Thank you.

NameUnavailable

I think from what you're saying the freehold is currently owned by two people, one of which owns one of the flats.

The current freeholders are offering you (and 2 others) the opportunity to own an equal share of freehold (i.e. each flat will effectively own 1/4 share of the freehold).

This is probably worth doing. If one person doesn't want to join in it could be split 3 ways so the 4th person remains just as a leaseholder (and pays ground rent etc. to the freeholders).

However, if work is required owning a share of freehold doesn't mean that you don't do the work. You can appoint a new management company or handle the management yourselves however. But a current freeholder will be involved so maybe it's best to speak to them to speak to the manco and raise your concerns over the cost/quality of work and maybe get an estimate from whoever you would prefer to use?

PalmTreeBreeze

Thank you. Yes that is correct - The current freeholders are offering you (and 2 others) the opportunity to own an equal share of freehold (i.e. each flat will effectively own 1/4 share of the freehold).

And yes I really think it is worth doing too. The current freeholders understand our flags around the manco and the quality/costs of work but seem lazy almost in fighting our corner as such. And yes, I am happy to do the work but we've only had 2 months notice to stump up £11k each (I don't have it without taking out a loan) and so I'd much rather we postpone, get our own quotes and save up at least half for the works to be done next year. That seems sensible to me. We've zero faith in the guy approved to do it otherwise. 

I think owning share of freehold is a good move for all of us and its what the FH want too. It seems odd theyve given us the choice of that or works, I suspect its a cashflow issue for them too.

eddddy

PalmTreeBreeze said:

So now the Freeholders have said we either press on with the Section 20 and postpone the share of Freehold sale or we press on with the Freehold purchase and postpone the Section 20. 

I don't really understand the logic behind that. Why would the freeholders delay the work, if you buy a share of the freehold?

PalmTreeBreeze said:

Last year we were given a Section 20 Major Works notice that we Leaseholders have tried to push back on as we are pretty sure the person awarded the work is the friend of the management company and his reputation is highly questionable from what we have found out online. We also don't think the scope of work is necessary. The cost is £11k per flat (it was £13k but agreed we can use all the sinking fund) and we simply don't have that money floating around. The Management Co are pushing hard for it to get done and have asked for the whole amount up front.

So do existing the 2 freeholders think the scope of work is necessary? If not, why don't they tell the management company to stop?

 
Or are you suggesting that the existing freeholders aren't assertive enough to tell the management company to stop (or to sack the management company)? If so, they can take you to the meetings with the management company, and you can tell them to stop.

PalmTreeBreeze

Yes exactly our confusion too - initially us Leaseholders said we didn't think the work was needed, flagged all of our worries about the way the manco had gone about it/who they selected and the FHs just said well it needs to be done, but hey we are also selling the freehold. That made us suspicious, we thought maybe they wanted the work done to get a higher valuation? Now they've realised it's not worth that much they are giving us this option of either work or freehold share. 
They say get it done based on estimate quoted as costs might rise next year, but I think thats the manco pressuring them.

NameUnavailable

The possible purchase of the freehold and the works required are two separate issues.

I don't understand the apparent choice you're being given between buying into the freehold OR doing the work. The work presumably is still required?

The management company are employed by the freeholders. They call the shots. They can tell the management company to postpone the work, or to get other quotes. Or they can get rid of them altogether.

PalmTreeBreeze

Exactly, I don't understand why it's a this or that. Both can be done. My preference is to own share of FH first and then make the decision around the building management, the contractors to do the work and when the work is done? I think pushing the FH to appoint new manco is the way forward for now.

NameUnavailable

PalmTreeBreeze said:

Exactly, I don't understand why it's a this or that. Both can be done. My preference is to own share of FH first and then make the decision around the building management, the contractors to do the work and when the work is done? I think pushing the FH to appoint new manco is the way forward for now.

No, a new manco will need to carry out various surveys/reports to determine what they need to do. If you're serious about buying into the freehold with the other neighbour then get together to ask the FH to pause the works pending the sale of the FH and agreement over how to manage the property going forward.

PalmTreeBreeze

OK thanks. I'll try again. 2 of us are in, 1 isn't so it's tricky

DullGreyGuy

NameUnavailable said:

I don't understand the apparent choice you're being given between buying into the freehold OR doing the work. The work presumably is still required?

Current freeholders want the works done but will accept that the new freeholders may have different views and so are willing to postpone the work for the change of management, if there isn't to be a change in ownership they'll push on.  Doesn't sound too complex to me and certainly makes sense from the perspective of the freeholder that is walking away from the property. 

NameUnavailable

DullGreyGuy said:

NameUnavailable said:

I don't understand the apparent choice you're being given between buying into the freehold OR doing the work. The work presumably is still required?

Current freeholders want the works done but will accept that the new freeholders may have different views and so are willing to postpone the work for the change of management, if there isn't to be a change in ownership they'll push on.  Doesn't sound too complex to me and certainly makes sense from the perspective of the freeholder that is walking away from the property. 

But one of the current freeholders will still own a share of the freehold........