Does a freehold Invalidate the terms of a leashold?

smoothieee

Two years ago I bought a flat within an Victoria building with several apartments and, when I bought my flat it was leasehold, the cost of building management including service charged was apportioned by percentage, i.e square footage apportionment and I am the smallest apartment. For example, when i bought I recall the service charge breakdown for a year being £700 for my apartment and £1400 for the larger apartments.

Six months ago, the block came together and bought the freehold after some unresolved issues with the leasholder, hence we are now freeholders under a registered company and they no longer wish to abide to the apportionment method by square footage. 

My question now, as set out on the lease, cost is apportioned by square footage BUT does transitting from leashold to freehold invalidates the terms set out by the leashold, is the terms of the leashold no longer valid because of 6 of 9 directors has voted in favour of an equal split and they are calling this as the final decision.

Please assist. 

DullGreyGuy

It's still leasehold, you now just own shares in the freeholder

The company that was formed to buy the freehold will have articles of association which will stipulate how decisions are made, it could be a simple majority, require unanimous decisions etc. 

Even still the freeholder cannot unilaterally change the leases, though clearly if everyone is in agreement they can. 

Time for negotiations or you stick to saying no, your lease won't be updated and they can just apportion the costs less yours equally. 

smoothieee

DullGreyGuy said:

It's still leasehold, you now just own shares in the freeholder

The company that was formed to buy the freehold will have articles of association which will stipulate how decisions are made, it could be a simple majority, require unanimous decisions etc. 

Even still the freeholder cannot unilaterally change the leases, though clearly if everyone is in agreement they can. 

Time for negotiations or you stick to saying no, your lease won't be updated and they can just apportion the costs less yours equally. 

Thank you for your support!
In plain language your point being that the terms of the lease remains valid as documented. Unless the freeholders comes together to change the wording of that document from apportioment to equal split the terms of the leashold remains valid and I am not doing anything wrong by calling for us to stick to the precedence that is currently in place otherwise they choose to change it and this doc remains valid until changed, correct? 

Brie

I take it to mean that if the freeholders (which includes you) want to change the terms of how the charges are applied there has to be a unanimous agreement.  So you say no they can't over-rule you.

RAS

You'd be wise to read the "articles of association", whatever the rules you all agreed to when you bought the freehold? What do those rules say about the right of the freeholders to change the lease?

I'd also contact the Leasehold Advisory Service about leasehold law on changes. I doubt they can change the rules without your agreement but I'd suggest you need to get hold of them, comprehend, and understand them so that you can state the law and make clear you understand the rules. "I don't think" leads to argument. "The law is clear, x,y,z" suggests there is nothing about which to argue.

smoothieee

RAS said:

You'd be wise to read the "articles of association", whatever the rules you all agreed to when you bought the freehold? What do those rules say about the right of the freeholders to change the lease?

I'd also contact the Leasehold Advisory Service about leasehold law on changes. I doubt they can change the rules without your agreement but I'd suggest you need to get hold of them, comprehend, and understand them so that you can state the law and make clear you understand the rules. "I don't think" leads to argument. "The law is clear, x,y,z" suggests there is nothing about which to argue.

Thank you I will call them tomorrow and may I please point out that while 6 out of 9 directors in the bigger flats voted for a general split calling a democratically decisive.

My understanding now is that whatever vote that they've cast on our WhatsApp group does not override the terms of the Actual Lease to split cost by apportionment, ( i.e %) unless this is unanimously agreed by all and revised on the freehold to reflect that, is my thinking correct?

Marky4040

smoothieee said:

Two years ago I bought a flat within an Victoria building with several apartments and, when I bought my flat it was leasehold, the cost of building management including service charged was apportioned by percentage, i.e square footage apportionment and I am the smallest apartment. For example, when i bought I recall the service charge breakdown for a year being £700 for my apartment and £1400 for the larger apartments.

Six months ago, the block came together and bought the freehold after some unresolved issues with the leasholder, hence we are now freeholders under a registered company and they no longer wish to abide to the apportionment method by square footage. 

My question now, as set out on the lease, cost is apportioned by square footage BUT does transitting from leashold to freehold invalidates the terms set out by the leashold, is the terms of the leashold no longer valid because of 6 of 9 directors has voted in favour of an equal split and they are calling this as the final decision.

Please assist. 

Hi there, the short answer is no the freeholder (it doesn't matter who or how many the freeholders are) they cannot change the terms of your lease unilaterally. They can vote for whatever they like but a lease can only be changed via a Deed of Variation which is a legal process which requires both freeholder and leaseholder agreement to proceed. 

They may be confused as to what they can actually do as the freeholders. The lease for your apartment is not dependant on what happens to the lease's of the other apartments under the same freehold, that would be ridiculous. 

propertyrental

Originally you had a lease. The building structure and the land beneath it were owned by a freeholder. The freeholder (not leaseholder as you erroneously state in your 1st post) was A N Other.

The legal situation has not really changed.

Now you still have a lease. The building structure and the land beneath it are owned by a registered company which is itself owned by a group of people who in your case are all the leaseholders.

The lease you originally owned is the same lease that you now own. And the terms of that lease (eg the amount of service charge you must pay) are also unchanged.

To change the terms of your lease (eg to make you liable to pay a higher proportion of the total service charge) would require the agreement of

a) you, as leaseholder, and

b) the freeholder (and you are a joint owner of the registered company that owns the freehold).

a) above is totally in your control. You can refuse, agree, or agree subject to whatever additional terms you want eg a lump sum compensation; a free lease extension to 999 years; whatever you want

b) above depends on the articles of association of the registered company. This may require 100% agreement of all freehold owners, or a simple majority, or something else

smoothieee

propertyrental said:

Originally you had a lease. The building structure and the land beneath it were owned by a freeholder. The freeholder (not leaseholder as you erroneously state in your 1st post) was A N Other.

The legal situation has not really changed.

Now you still have a lease. The building structure and the land beneath it are owned by a registered company which is itself owned by a group of people who in your case are all the leaseholders.

The lease you originally owned is the same lease that you now own. And the terms of that lease (eg the amount of service charge you must pay) are also unchanged.

To change the terms of your lease (eg to make you liable to pay a higher proportion of the total service charge) would require the agreement of

a) you, as leaseholder, and

b) the freeholder (and you are a joint owner of the registered company that owns the freehold).

a) above is totally in your control. You can refuse, agree, or agree subject to whatever additional terms you want eg a lump sum compensation; a free lease extension to 999 years; whatever you want

b) above depends on the articles of association of the registered company. This may require 100% agreement of all freehold owners, or a simple majority, or something else

May I please ask, in a rather different situation where the Lease does not state how cost should be shared, how is this resolved?

Will a vote by share holders/free holders by X criteria becomes valid, i.e can they vote for it to be shared equally or by percentage?

eddddy

smoothieee said:

May I please ask, in a rather different situation where the Lease does not state how cost should be shared, how is this resolved?

If the lease said nothing about sharing costs (which is very unlikely), it would probably be classed as a 'defective lease' - and solicitors would probably advise mortgage lenders not to lend on the properties.

But if a lease was defective in that way, a leaseholder or freeholder could apply to a tribunal for a compulsory lease variation to correct the lease (under Section 35 of the Landlord and Tenant Act 1987). The tribunal would probably want evidence that the proposed shares are reasonable.


Some leases say things like percentage shares can be changed based on the opinion of a Chartered Surveyor.

But if a leaseholder didn't like the result of those changes, they could challenge the resulting Service Charge bill at a tribunal. And the tribunal would decide whether the new share is reasonable.

eddddy

smoothieee said:

Will a vote by share holders/free holders by X criteria becomes valid, i.e can they vote for it to be shared equally or by percentage?

Taking a step back, assuming the lease isn't defective, there are 2 ways that your lease can be varied (changed) in these types of circumstances...


1) The leaseholder and freeholder both agree to the changes

(In that case "who votes for what" is irrelevant. It's down to those 2 parties to agree.)



2) An application is made to a tribunal to vary the leases

(Under Section 37 of the Landlord and Tenant Act 1987)

In simple terms, that requires the support of 75% of leaseholders supporting the change, and fewer than 10% of the leaseholders objecting.

But if the result would be that you pay more Service Charge, you would tell the tribunal that the change would be prejudicial to you - and the tribunal would then probably reject the application.