Paying Freeholders Legal fees??

Worpy1

Hello 
I moved into my flat in 2022 there are 4 flats in the building including mine. Now that all flats have been sold the share of freehold is being transferred to the leaseholders. I received an email from my solicitor last week advising that the Freeholder / Developer has asked that we pay their legal fee's from the service charge funds we all pay into each month. The amount is c£600 I just wondered if this was normal in such a transaction ? He has not mentioned anything about this previously.

Marky4040

Worpy1 said:

Hello 
I moved into my flat in 2022 there are 4 flats in the building including mine. Now that all flats have been sold the share of freehold is being transferred to the leaseholders. I received an email from my solicitor last week advising that the Freeholder / Developer has asked that we pay their legal fee's from the service charge funds we all pay into each month. The amount is c£600 I just wondered if this was normal in such a transaction ? He has not mentioned anything about this previously.

Hi There, yes it is normal for them to ask you to pay the legal fees of a process which is of benefit to you, however you'll still need a breakdown of the freeholders fees in transferring the freehold to the 4 of you. I mean that's £2400 in total? Sounds a little expensive. Or do you mean the total is £600 for 4 of you? That would be reasonable. 

Emmia

We had to pay the freeholder's legal fees when replacing an outside door and windows recently which were rotten due to a lack of maintenance (by the managing agent/freeholder). Fee was around £500 for them to look at pictures of identical windows to the ones we had. 

Unfortunately I expect you'll need to pay it... And then the fun and games of share of freehold start. 

eddddy

As others say, it's normal that you would pay the freeholders legal fees, but you can check the contract/deed you probably signed when you bought the property (or possibly the lease) to check that's what it says.

But it seems a bit strange to use service charge funds as the way of doing this.

It means you'll all probably have to 'top-up' the service charge funds at some point.

Marky4040

eddddy said:

As others say, it's normal that you would pay the freeholders legal fees, but you can check the contract/deed you probably signed when you bought the property (or possibly the lease) to check that's what it says.

But it seems a bit strange to use service charge funds as the way of doing this.

It means you'll all probably have to 'top-up' the service charge funds at some point.

It's because the service charge funds are often available to use right away, rather than asking all parties to cough up an amount each, which delays the process. 

eddddy

Marky4040 said:

eddddy said:

As others say, it's normal that you would pay the freeholders legal fees, but you can check the contract/deed you probably signed when you bought the property (or possibly the lease) to check that's what it says.

But it seems a bit strange to use service charge funds as the way of doing this.

It means you'll all probably have to 'top-up' the service charge funds at some point.

It's because the service charge funds are often available to use right away, rather than asking all parties to cough up an amount each, which delays the process. 

The service charge funds are only available to the freeholder when all parties agree (probably in writing) that the freeholder can use the cash for these legal costs.

I suspect that a disorganised leaseholder who would be slow to transfer £600, would be equally slow to give written consent to use service charge funds..


(Express consent would be required from the leaseholders, because the lease is unlikely to say that service charge funds can be used for the freeholder's legal costs for transferring the freehold.)

Worpy1

Thanks everyone for your comments, I haven't been party to this type of transaction previously so wasn't sure of how things worked. 

gwynlas

I would want to be sure that the current freeholder was transferring the freehold to a named entity ie a limited company that you are directors of and all given share certificates for, Managing a shared freehold such as collecting and administrating service charge takes some work so unless you have a competent fellow freeholder that you trust to administer this role you are probably best appointing a management agent who will act on behalf of you all. it is better that this is done immediately rather than some way down the line when one of you is wanting to sell on.

eddddy

gwynlas said:

I would want to be sure that the current freeholder was transferring the freehold to a named entity ie a limited company that you are directors of and all given share certificates for, Managing a shared freehold such as collecting and administrating service charge takes some work so unless you have a competent fellow freeholder that you trust to administer this role you are probably best appointing a management agent who will act on behalf of you all. it is better that this is done immediately rather than some way down the line when one of you is wanting to sell on.

I suspect all the terms will have been contractually agreed when the OP bought their flat.

But it the OP wants different terms, I guess the OP might be able to persuade all the other parties to agree to do something different.

 

gm0

It's normal for the people acquiring the freehold in common to pay.  The freehold value being subject to its own rules about how a fair one is determined.  So complicating that element with lease situations from 2 to 200 shares would not really help.

I would urge you to pay attention to what the freehold is to be acquired into.  And how that is structured.  And what the articles say about decision making within it. Voting.

This could well be a LTD company, created for the purpose. 

And that could be a LTD by share capital.  Which means the shares need "moving" when leaseholders sell/buy.  You do not want fragments of the freehold wandering off.   They need to stay close to lease assignment. 
Which is one set of pain. 

Or it could be a LTD by guarantee with a list of members and a definiton that "assigning the lease" ends one "membership" and creates the new member of the company.  No shares.  The new lease names signing the lease - need to nominate one of them as their single "vote" and/or appoint a proxy (corporate owners, overseas etc.).  No split votes.  No multiple votes.  No divorcee split fractional votes etc.  One lease.  One demised space.  One vote.  One name.  Proxy available. 

Plan for rain.  Carry an umbrella.