Buying the freehold on my block of flats

eddddy

I'm not sure that your letter is very fair.

I might put something like this in the intro:

"As leaseholders we can club together and buy the freehold at any time we choose, using a process called collective enfranchisement.

But the price offered by the section 5D notice might be cheaper - or it might be more expensive. We will need to hire a freehold valuer to give their opinion. I have a quote from a freehold valuer to do a valuation - the quote is £x, so you will each need to contribute £y towards the cost of the valuation. Let me know in writing if you agree to pay £y."

Next... have you checked your lease to make sure that the freeholder is responsible for insuring, maintaining, and repairing the building? If the freeholder isn't, a lot of what you say is not relevant.

(If it's a tripartite lease - between 3 parties - the freeholder probably isn't responsible for maintaining and repairing the building.)

If the freeholder is responsible for insuring, maintaining, and repairing the building, I would say something like:

"Our current freeholder uses <management company A> to manage the building. The new freeholder might continue to use <management company A>, or they might hire a new management company, or they might manage the building themselves.

The result might be better or worse for leaseholders. 

Some people buy freeholds purely for investment - the income from ground rent, lease extensions, etc.

But there are also some less reputable people who buy freeholds in order to make excessive profit from freeholders, by dodgy means."

textbook

eddddy said:

textbook said:

Should I check land registry that the freehold really is all 4 blocks and all 22 flats?

No - that isn't really helpful at this stage.

You still haven't answered - What do you mean by 4 'blocks'?  Do you mean 4 buildings?

That information is vitally important. The law relates to buildings, it doesn't relate to blocks.

As a section 5D notice can only relate to one building.

textbook said:

For example I don't understand the headlease.

You mentioned a headlease - it's impossible to guess what the structure of the headlease is.

As a random example, it could be:

• Arthur owns the freehold of the whole estate
• Bill owns the headlease of Building 1
• Charlie owns the headlease of Building 2
• Doug owns the headlease of Building 3
• Ed owns the headlease of Building 4

• And you own the lease (or sublease) of one flat in Building 4

So one question would be... did Arthur send you the section 5D notice or did Ed send you the section 5D notice?

textbook said:

I dunno if we all pay the same ground rent.   The flats might vary in price by say £30,000 I guess (some are in better condition e.g. new bathrooms etc).  They're all the same size but have different lease lengths.

That doesn't impact the purchase process, but it might have a sever impact on "fairness".

As a random example...

• If one flat has a 70 year lease and pays £100 per year ground rent - maybe they should contribute £10k to the freehold purchase

• If another flat has done a statutory lease extension so has a 160 year lease and zero ground rent - maybe they should only contribute £500 to the leasehold purchase

A valuer would be able to calculate the breakdown. Or maybe you say nothing, and ask everyone to contribute the same - and hope that some people don't realise they're being treated unfairly.

(FWIW, new bathrooms etc should be ignored for that calculation.)

textbook said:

What are the risks if someone else buys the freehold to us?   This might be the biggest selling point in the meeting 

Are you really sure it's the 'freehold' that's being offered and not a 'headlease' - I can't see the word 'freehold' in the letter in your first post, but perhaps I missed it?

Your lease will tell you what the rights and responsibilities of the Freeholder or Head Leaseholder are.  The buyer will take over those rights and responsibilities.

Often, the freeholder's or Head Leaseholder's responsibilities include insuring, maintaining and repairing the building. So the new freeholder or Head Leaseholder will be responsible for that.



But the leaseholders can club together to 'compulsorily purchase' the freehold of their building at any time anyway.

(So you could see how things go with the new freeholder or new head leaseholder - and if it isn't working out, the leaseholders can 'compulsorily purchase' the freehold)

Four buildings four blocks I dunno the difference sorry.  They all near each other but not touching like detached houses.


I went on land registry to check who owns what blocks to check if they're really selling all 22 flats in 4 blocks as their solicitor said

I checked three different flats from 3 different blocks on land registry (title holder) the freeholder for all is same company.  Must be all blocks and 22 flats for sale?  

eddddy

textbook said:

Four buildings four blocks I dunno the difference sorry.  They all near each other but not touching like detached houses.


I went on land registry to check who owns what blocks to check if they're really selling all 22 flats in 4 blocks as their solicitor said

I checked three different flats from 3 different blocks on land registry (title holder) the freeholder for all is same company.  Must be all blocks and 22 flats for sale?  

I've explained this multiple times. And I've quoted the legislation and provided a link to the legislation.

A section 5D notice can only relate to one building. That is the law.

• The current freeholder might own the freehold of 4 buildings
• The current freeholder might be selling the freehold of 4 buildings
• The 4 buildings might be on one title
• The current freeholder might own the freehold of 400 buildings
• The current freeholder might be selling the freehold of 400 buildings
• The 400 buildings might be on one title

BUT... A section 5D notice can only relate to one building.

Obviously, it's possible that your freeholder has served 4 'sets' of section 5D notices. I 'set' for each building.



More generally, if you want to manage a freehold building containing leasehold flats, you'll need to...
- Read and understand a huge pile of legislation
- Read and understand leases
- Understand concepts like leases, head leases and sub-leases

It can very quickly become a nightmare for flat owners, if joint freeholders try to manage a building when they don't understand this stuff.

If you can't get to grips with this stuff, it might be better to step back from this.

textbook

Just spoke to a solicitor who has often dealt with our block of flats.

The section 5 is for all 22 flats all 4 blocks. I've been overthinking it though. If a third party does buy ilthe freehold the maintenance and ground rent won't change. The main benefit is for people who haven't renewed their leases. Mine is quite long 116 and was renewed. I dunno how much I'll benefit from it now.  The solicitor will use a valuer. 

Your comments about freeholders having to manage legislation sounds daunting.   Can this be given to someone else to deal with?  E g. Our current management company- Foxes.   

Got a meeting Wed.  I'm trying to get a quote off a solicitor to give everyone a figure.   Would it be solicitor's fees plus the £61,000 divided by however many want to participate?

Please bear with me, I'm finding it hard to understand all this.  

eddddy

textbook said:

The section 5 is for all 22 flats all 4 blocks. 

Here's what the legislation says:

(3) Where a landlord proposes to effect a transaction involving the disposal of an estate or interest in more than one building (whether or not involving the same estate or interest), he shall, for the purpose of complying with this section, sever the transaction so as to deal with each building separately.

Link: https://www.legislation.gov.uk/ukpga/1987/31/section/5

Here's what the leasehold advisory service says:

More than one building

The legislation states that if the proposed transaction involves the disposal of an estate or interest in more than one building the landlord must sever the transaction so as to deal with each building separately. Each building being disposed of would receive their own RFR notice.

Link: https://www.lease-advice.org/advice-guide/right-first-refusal/

Here's what a random firm of solicitors says:

What happens where the freeholder is selling the freehold of more than one building?

Each sale is dealt with separately – so each building needs to receive its own RFR Offer Notice.

Link: https://www.bishopslaw.co.uk/lease-enfranchisement/right-of-first-refusal/

Here's a summary of what the Court of Appeal said about FSV Freeholders Ltd v SGL 1 Ltd:

The Court of Appeal has held that where a landlord is required to serve qualifying tenants of flats with an offer notice pursuant to section 5 of the Landlord and Tenant Act 1987 (LTA 1987) (tenants’ rights of first refusal) and the transaction involves the disposal of an estate or interest in more than one building, then by virtue of section 5(3) they should ‘sever the transaction’ and serve separate offer notices in relation to each building.

Link: https://www.lexisnexis.co.uk/legal/news/section-5-notices-severing-the-transaction-fsv-freeholders-ltd-v-sgl-1-ltd

But in another case, Long Acre Securities Ltd v Karet, the High court decided that:

In Long Acre Securities Ltd v Karet [2004] EWHC 442 (Ch), the court held that a building scheme (where flats share areas such as gardens) should be construed as one “building” for the purposes of the Act.

Link:https://www.dacbeachcroft.com/en/What-we-think/Case-Law-Update-Tenant-Pre-Emption-Rights-under-the-Landlord-and-Tenant-Act-1987

But I don't think that last case was appealed, and some lawyers still think it was the wrong decision.


The significance to you is

• you want to establish whether the £61,600 is just for your building, or for all 4 buildings (but you say you've established that it's for all 4 buildings)
• if you just want to buy the freehold of one building, and not all 4

Otherwise you can ignore the problem.

textbook

Ok thxs.   Regarding meeting tomorrow I've forwarded the solicitor's info but you think put a copy through each of their letters boxes.  I've even broken down costs so it's super clear

eddddy

So you're proposing that everyone pays the same amount.

- That's not fair on people who have already paid to extend their lease.

- That's potentially not fair on people who currently pay lower ground rents

textbook said:

If a third party does buy ilthe freehold the maintenance and ground rent won't change. 

Are you saying it's a tripartite lease, so the freeholder isn't responsible for maintenance of the building?

textbook said:

Your comments about freeholders having to manage legislation sounds daunting.   Can this be given to someone else to deal with?  E g. Our current management company- Foxes.   

If it's a tripartite lease, there's probably very little for the freeholder to do. But you can pay a company to do stuff if you want.

textbook

eddddy said:

textbook said:

The section 5 is for all 22 flats all 4 blocks. 

Here's what the legislation says:

(3) Where a landlord proposes to effect a transaction involving the disposal of an estate or interest in more than one building (whether or not involving the same estate or interest), he shall, for the purpose of complying with this section, sever the transaction so as to deal with each building separately.

Link: https://www.legislation.gov.uk/ukpga/1987/31/section/5

Here's what the leasehold advisory service says:

More than one building

The legislation states that if the proposed transaction involves the disposal of an estate or interest in more than one building the landlord must sever the transaction so as to deal with each building separately. Each building being disposed of would receive their own RFR notice.

Link: https://www.lease-advice.org/advice-guide/right-first-refusal/

Here's what a random firm of solicitors says:

What happens where the freeholder is selling the freehold of more than one building?

Each sale is dealt with separately – so each building needs to receive its own RFR Offer Notice.

Link: https://www.bishopslaw.co.uk/lease-enfranchisement/right-of-first-refusal/

Here's a summary of what the Court of Appeal said about FSV Freeholders Ltd v SGL 1 Ltd:

The Court of Appeal has held that where a landlord is required to serve qualifying tenants of flats with an offer notice pursuant to section 5 of the Landlord and Tenant Act 1987 (LTA 1987) (tenants’ rights of first refusal) and the transaction involves the disposal of an estate or interest in more than one building, then by virtue of section 5(3) they should ‘sever the transaction’ and serve separate offer notices in relation to each building.

Link: https://www.lexisnexis.co.uk/legal/news/section-5-notices-severing-the-transaction-fsv-freeholders-ltd-v-sgl-1-ltd

But in another case, Long Acre Securities Ltd v Karet, the High court decided that:

In Long Acre Securities Ltd v Karet [2004] EWHC 442 (Ch), the court held that a building scheme (where flats share areas such as gardens) should be construed as one “building” for the purposes of the Act.

Link:https://www.dacbeachcroft.com/en/What-we-think/Case-Law-Update-Tenant-Pre-Emption-Rights-under-the-Landlord-and-Tenant-Act-1987

But I don't think that last case was appealed, and some lawyers still think it was the wrong decision.


The significance to you is

• you want to establish whether the £61,600 is just for your building, or for all 4 buildings (but you say you've established that it's for all 4 buildings)
• if you just want to buy the freehold of one building, and not all 4

Otherwise you can ignore the problem.

I think it's one building as we do share a garden, parking and drive.  Solicitor will confirm by checking bit was sure it was classed as one building.


I have no idea if it's a tripartite system.    We have a management company yes.   

eddddy

textbook said:

I have no idea if it's a tripartite system.    We have a management company yes.   

A tripartite lease.

You need to read your lease to find out.

If you have a tripartite lease, 90% of what you said in the letter you posted here on 31st October is incorrect and irrelevant.

textbook

eddddy said:

textbook said:

I have no idea if it's a tripartite system.    We have a management company yes.   

A tripartite lease.

You need to read your lease to find out.

If you have a tripartite lease, 90% of what you said in the letter you posted here on 31st October is incorrect and irrelevant.

I dunno if it's a tripartite system.  We have Foxes- property management company who fix the roofs etc, there's a headlease and of course individual leases.

My lease was extended so I'd like to pay less but the solicitor said sometimes to keep the peace everyone pays the same.  How much less would you suggest lease extenders pay?

Found my lease I think