Responsibilities of being a director of a freehold

eddddy

textbook said

Surely there's a formula for working out the price of freehold and we do it ourselves? How complicated can it be?

In simple terms, the process generally works out something like this (using some example numbers)…

• Your valuer says "I believe the price of the freehold should be £40k, because of a, b, c and d"
• The freeholder's valuer says "I believe the price should be £70k because of w, x, y and z"
• Then the valuers argue/negotiate and finally agree on a price of £55k

You ask "How complicated can it be?" Take a look here:

• The calculation formula is documented in Schedule 6 of the Leasehold Reform, Housing and Urban Development Act 1993
• Here: https://www.legislation.gov.uk/ukpga/1993/28/schedule/6/enacted

• A chartered survey explains it in plainer English here: https://lbb.org.uk/flats-enfranchisement-relevant-details-explained

• A firm of solicitors have a calculator on their website (but I don't know how realistic it is)
• Here: https://www.bradysolicitors.com/leasehold-collective-enfranchisement-calculator/

textbook said

Regarding them not paying maintenance fees,surely use our maintenance company to deal with the legal aspects of that. We'll still be employing a maintenance company. Tell me if I've got it wrong

Do you mean you'll be hiring a Managing Agent to carry out all the freeholder's duties?

In that case, hopefully, you'll be hiring an experienced Managing Agent who can advise you on stuff, and who will just get on with doing what needs doing.

But I guess you will need to be very thorough about understanding and agreeing terms with the managing agent before you hire them. Otherwise you might end up with a managing agent who is worse than your current one.

(And hopefully, you've checked your lease to make sure that:

• It's the freeholder who is responsible for managing the building - i.e. it is not a tripartite lease
• There is no intermediate lease.)

gm0

In order to get this over the line. You can expect it to take a couple of years. And perhaps two AGMs of all your voting leaseholders to join in and become shareholders/members of the acquiring entity. An in principle go and do it vote. And a here are the final details to press the button one.

And then to pay up, or pay service charge levies to service a freehold purchase loan over say 5 years. And vote all that through. Establishing the company, going via RTM or not. Building such a consensus if people are fussing over a smaller figure to find out how much the freehold will cost isn't confidence inspiring.

It's quite a chunk of work to do it right. No you can't get a number free - that has any future validity to be imposed on the freeholder. You do it by the prescribed method. Or you don't.

To get to the "are enough people interested in principle" step without spending money you have to use a guesstimate. With the correct number of zeros and not a lot more validity than that.

With extant very long leases and not a lot of obvious site development potential. Values tend not to be millions, more tens of thousands zone for the communal structure (and its liabilities) and grounds. Rarely less than that. But your site is your site and if it has a lot of recognised development potential that can complicate things.

The act of forming the company and its membership and agreeing its articles. And maybe invoking RTM to use your own appointed agent. Can be used to get people engaged in common in some manner which builds confidence, provides the purchase vehicle as you build consensus. It is in my view better to get all leases on board and not proceed with a majority but with non-owner leaseholders to deal with forever after as a 2nd group. (Leashold rights and obligations but not company members and no SOF vote). Sub-optimal. But you proceed or not - if a few people don't want to play.

As I say 2-3 years to do it in many communities. A couple of directors to get it up and running. Making it credit worthy enough to borrow some of the capital can avoid a large single year contribution cash call. At a cost. This additional cost upsets some, and makes the transaction viable for others.

A trick we used was to have a freehold purchase loan and levy. And then not end it. But drop it down 50% and establish the concept of a sinking fund contribution alongside annual in year costs - against unexpected and longer term renewal items which would otherwise just be full size Section20 cash calls. Again some think that's a good practice and others hate the idea of the tiny company having "their" money ahead of the actual liability showing up.

textbook

https://forums.moneysavingexpert.com/discussion/comment/81942578#Comment_81942578

Regarding this formula calculator from Brady's how would i get the individual data from each flat to input it ?

https://www.bradysolicitors.com/leasehold-collective-enfranchisement-calculator/

This is a letter from solicitor. It's gonna be hard getting 3 people from all 4 blocks

eddddy

textbook said

Regarding this formula calculator from Brady's how would i get the individual data from each flat to input it ?

For lease start date, original lease term and ground rent - your options are:

• Ask the flat owners (leaseholders)
• Download the title register for each flat from Land Registry (at £7 per flat)
• Assume that the lease start date, original lease term and ground rent are the same for other flats as your flat (in order to get a rough estimate)

For the (market) value of each flat, look for comparable flats that have sold in the last 6 months, and use the sale price.

The 'local valuer' will ask for exactly the same information - so you'll need to get it anyway. And the valuer might want to visit each flat, as well.

If other flat owners aren't going to cooperate by giving you this type of information and/or refusing to provide access to their flats, you're going to find it very difficult to buy the freehold.

textbook said

This is a letter from solicitor. It's gonna be hard getting 3 people from all 4 blocks

Based on my understanding of the legislation, I think your solicitor means this:

• There are 4 flats in each building
• There are 12 flats in the development overall
• You need over 50% of leaseholders per building (not per development) to participate in order to buy the freehold

So…

• If you want to buy the freehold of one building (4 flats), you need 3 leaseholders to participate

• If you want to buy the freehold of all 12 flats in the development (3 buildings) , it is not sufficient for 7 leaseholders to participate (i.e. more than 50% of the 12 flats)
• Instead, of 7 leaseholders across the development to participate - you have to get 3 leaseholders per building to participate

It sounds like you only want to buy the freehold of one building - so you need 3 leaseholders from that building to participate.

textbook

5 or 6 flats per block and 4 blocks. Total 22 flats

eddddy

textbook said

5 or 6 flats per block and 4 blocks. Total 22 flats

OK - but the principle I described still applies.

textbook

Just a thought, can we for example just buy the freehold of one block and leave the other three?

eddddy

textbook said

Just a thought, can we for example just buy the freehold of one block and leave the other three?

Yes - as I explained, the leaseholders in one building can club together to buy the freehold of their building, using Collective Enfranchisement.

textbook

https://forums.moneysavingexpert.com/discussion/comment/81961814#Comment_81961814

Thxs and interesting. I'm trying to work out the valuation cost myself using Brady's online formula

I have two leases running inline (one is a lease extension) with each other.

when's my lease start date ?

Original - 1975

Extension- 2015/2016

eddddy

textbook said

I have two leases running inline (one is a lease extension) with each other.

when's my lease start date ?

Original - 1975

Extension- 2015/2016

(Generally, you don't end up with 2 leases ad the result of a lease extension. As the name suggests, you have just one lease that has been extended. But perhaps you have some kind of 'unusual' arrangement.)

But anyway, the calculator wants to work out the years remaining on the lease - i.e. how many years until the freeholder is due to get the flat back from the leaseholder.

Generally, that means you put the start date of the original lease (e.g. 1975) and the length of the extended lease (e.g. 189 years) - so that the calculator can work out that you have 138 years remaining on the lease.

But, fwiw… If some people have extended their leases and others haven't - and/or people have extended their leases by different amounts - that will make the process of deciding how much each person should pay towards the freehold more complicated.