Share of Freehold - flat within a converted freehold house

JonMitchell

Hi folks

Starting a new thread from a recent offer accepted for the flat that we are hoping to buy for our son.

There are currently 7 newly converted flats (planning permission approved and completed) within this freehold house.

We were initially informed by the estate agent that the seller of the freehold house will give a new lease 999yr to all leasers and subsequently gift share of freehold when all flats were sold (1 remaining flat).

However when we received the draft lease, we noted the landlord is still the seller. Queried the estate agent and was told Share of Freehold may at somepoint in the future, be gifted instead.

EA's reasoning -
a.) holding freehold by the seller with a 999yrs lease holds no financial benefit for the seller.

b.) Have asked the EA for a definitive timescale as we were given different story from the beginning.

c.) 2yrs, 5yrs or 10yrs - seller might change their mind and not gift instead. That we might have to pay extra for share of freehold eventually.


Current settings of the lease:

1.) Ground rent will be peppercorn,

2.) No management company as yet as its newly converted flats. Therefore no idea what service charge would be. Though we suspect we might be subjected to heavy service charge and building insurance by the landlord (ie seller) if the seller does not gift away share of freehold.

Of course, we were not comfortable with the Share of Freehold stories.

Is there of any immediate concerns and implications with this? 

Any thoughts would be great!

user1977

What does the contract say about the freehold?

JonMitchell

user1977 said:

What does the contract say about the freehold?

Nothing mentioned whatsoever about gifting of the Share of Freehold at the moment, just a standard leasehold contract. 

user1977

Who's been calling it "gifting"? I would hope it's more "included in the price" rather than you crossing your fingers that you get something nice for Christmas.

JonMitchell

user1977 said:

Who's been calling it "gifting"? I would hope it's more "included in the price" rather than you crossing your fingers that you get something nice for Christmas.

Its the estate agent unfortunately, when they show us the flat - we have it in email writing from the EA that seller will gift once all flats have been sold but guess this email holds no legal ground. 

What we are concerned now, after receiving the lease contract, are:

a.) Seller may only say gifting Share of Freehold as to entice buyers but has no intention to gift.

b.) Seller might come out with another stun - if you want share of freehold, its £XXX amount, at latter stage.

Quite annoyed with the story telling being and given misleading information. 

gwynlas

With a 999 year lease and a stated peppercorn ground rent what more are you expecting.

It looks as though the only way the freeholder could make any money would be by running the management company themselves and benefitting from management charges.

The leaseholders could push for a Right to Manage situation so there would be no benefit to the freeholder.

JonMitchell

gwynlas said:

With a 999 year lease and a stated peppercorn ground rent what more are you expecting.

It looks as though the only way the freeholder could make any money would be by running the management company themselves and benefitting from management charges.

The leaseholders could push for a Right to Manage situation so there would be no benefit to the freeholder.

Thanks. I am not asking for anything more - all I am asking is to be given the correct information, not misleading info with what happened from the EA. Not trying to be greedy nor being an opportunist.

Will look at Right to Manage, thanks.

eddddy

JonMitchell said:

user1977 said:

Who's been calling it "gifting"? I would hope it's more "included in the price" rather than you crossing your fingers that you get something nice for Christmas.

Its the estate agent unfortunately, when they show us the flat - we have it in email writing from the EA that seller will gift once all flats have been sold but guess this email holds no legal ground. 

What we are concerned now, after receiving the lease contract, are:

a.) Seller may only say gifting Share of Freehold as to entice buyers but has no intention to gift.

b.) Seller might come out with another stun - if you want share of freehold, its £XXX amount, at latter stage.

Quite annoyed with the story telling being and given misleading information. 

You need to move away from using the term "gift". 

Either the share of freehold is included in the contract (or a water-tight commitment to transfer the freehold at a defined point in the future is included in the contract)...

... or it isn't.

And if the seller really intends to transfer the freehold to the leaseholders at some point in the future - why not say so in the contract?



FWIW, a tribunal would value the freehold at roughly £0. So if the freeholder refused to include the share of freehold in the contract, then 4 or more leaseholders could get together and 'compulsorily purchase' the freehold for roughly £0.

But you'd have to pay your own legal expenses and the freeholder's legal expenses, which might add up to a few thousand. And it might take 6 months or more.

(So at least 3 other leaseholders would have to cooperate and pay a share of the costs.)

JonMitchell

eddddy said:

JonMitchell said:

user1977 said:

Who's been calling it "gifting"? I would hope it's more "included in the price" rather than you crossing your fingers that you get something nice for Christmas.

Its the estate agent unfortunately, when they show us the flat - we have it in email writing from the EA that seller will gift once all flats have been sold but guess this email holds no legal ground. 

What we are concerned now, after receiving the lease contract, are:

a.) Seller may only say gifting Share of Freehold as to entice buyers but has no intention to gift.

b.) Seller might come out with another stun - if you want share of freehold, its £XXX amount, at latter stage.

Quite annoyed with the story telling being and given misleading information. 

You need to move away from using the term "gift". 

Either the share of freehold is included in the contract (or a water-tight commitment to transfer the freehold at a defined point in the future is included in the contract)...

... or it isn't.

And if the seller really intends to transfer the freehold to the leaseholders at some point in the future - why not say so in the contract?



FWIW, a tribunal would value the freehold at roughly £0. So if the freeholder refused to include the share of freehold in the contract, then 4 or more leaseholders could get together and 'compulsorily purchase' the freehold for roughly £0.

But you'd have to pay your own legal expenses and the freeholder's legal expenses, which might add up to a few thousand. And it might take 6 months or more.

(So at least 3 other leaseholders would have to cooperate and pay a share of the costs.)

Thanks for your comments!

The term "gift" started from the EA, we have asked something along your two pointers last week (great to know you have similar views, thanks) and waiting for the seller's solicitor to revert - either the EA was telling porky (though ) or seller has no intention to transfer share of freehold.

With a 999 yrs & peppercorn ground rent, is it worth the freeholder, ie the seller, holding on to the freehold itself? Apart from charging high service charge via management co. - wont it be more cumbersome for the landlord?

First time buying a leasehold property for us, so learning the ropes even at our old age.  

Tiglet2

JonMitchell said:

eddddy said:

JonMitchell said:

user1977 said:

Who's been calling it "gifting"? I would hope it's more "included in the price" rather than you crossing your fingers that you get something nice for Christmas.

Its the estate agent unfortunately, when they show us the flat - we have it in email writing from the EA that seller will gift once all flats have been sold but guess this email holds no legal ground. 

What we are concerned now, after receiving the lease contract, are:

a.) Seller may only say gifting Share of Freehold as to entice buyers but has no intention to gift.

b.) Seller might come out with another stun - if you want share of freehold, its £XXX amount, at latter stage.

Quite annoyed with the story telling being and given misleading information. 

You need to move away from using the term "gift". 

Either the share of freehold is included in the contract (or a water-tight commitment to transfer the freehold at a defined point in the future is included in the contract)...

... or it isn't.

And if the seller really intends to transfer the freehold to the leaseholders at some point in the future - why not say so in the contract?



FWIW, a tribunal would value the freehold at roughly £0. So if the freeholder refused to include the share of freehold in the contract, then 4 or more leaseholders could get together and 'compulsorily purchase' the freehold for roughly £0.

But you'd have to pay your own legal expenses and the freeholder's legal expenses, which might add up to a few thousand. And it might take 6 months or more.

(So at least 3 other leaseholders would have to cooperate and pay a share of the costs.)

Thanks for your comments!

The term "gift" started from the EA, we have asked something along your two pointers last week (great to know you have similar views, thanks) and waiting for the seller's solicitor to revert - either the EA was telling porky (though ) or seller has no intention to transfer share of freehold.

With a 999 yrs & peppercorn ground rent, is it worth the freeholder, ie the seller, holding on to the freehold itself? Apart from charging high service charge via management co. - wont it be more cumbersome for the landlord?

First time buying a leasehold property for us, so learning the ropes even at our old age.  

Please stop asking the EA for advice.  EA's are selling the property on behalf of their client, the seller.  EAs do not have any legal training and they are not qualified to give you legal advice.  It's obvious from what you have written that this particular EA has no idea and is just trying to convince you/your son to continue with the purchase by saying things they think you want to hear.

Your solicitor is the only party that can give you advice about the set up of this particular property.  They are acting for you and if you don't understand the lease documents, then your solicitor should advise.

However, a peppercorn ground rent and a 999 lease length should not be a cause for concern.  If there are seven owner occupiers, it may be that the intention is for the freeholder to set up a management company of which each flat's owners have a share in the company, but this is for you to ask your solicitor.

JonMitchell

Tiglet2 said:

JonMitchell said:

eddddy said:

JonMitchell said:

user1977 said:

Who's been calling it "gifting"? I would hope it's more "included in the price" rather than you crossing your fingers that you get something nice for Christmas.

Its the estate agent unfortunately, when they show us the flat - we have it in email writing from the EA that seller will gift once all flats have been sold but guess this email holds no legal ground. 

What we are concerned now, after receiving the lease contract, are:

a.) Seller may only say gifting Share of Freehold as to entice buyers but has no intention to gift.

b.) Seller might come out with another stun - if you want share of freehold, its £XXX amount, at latter stage.

Quite annoyed with the story telling being and given misleading information. 

You need to move away from using the term "gift". 

Either the share of freehold is included in the contract (or a water-tight commitment to transfer the freehold at a defined point in the future is included in the contract)...

... or it isn't.

And if the seller really intends to transfer the freehold to the leaseholders at some point in the future - why not say so in the contract?



FWIW, a tribunal would value the freehold at roughly £0. So if the freeholder refused to include the share of freehold in the contract, then 4 or more leaseholders could get together and 'compulsorily purchase' the freehold for roughly £0.

But you'd have to pay your own legal expenses and the freeholder's legal expenses, which might add up to a few thousand. And it might take 6 months or more.

(So at least 3 other leaseholders would have to cooperate and pay a share of the costs.)

Thanks for your comments!

The term "gift" started from the EA, we have asked something along your two pointers last week (great to know you have similar views, thanks) and waiting for the seller's solicitor to revert - either the EA was telling porky (though ) or seller has no intention to transfer share of freehold.

With a 999 yrs & peppercorn ground rent, is it worth the freeholder, ie the seller, holding on to the freehold itself? Apart from charging high service charge via management co. - wont it be more cumbersome for the landlord?

First time buying a leasehold property for us, so learning the ropes even at our old age.  

Please stop asking the EA for advice.  EA's are selling the property on behalf of their client, the seller.  EAs do not have any legal training and they are not qualified to give you legal advice.  It's obvious from what you have written that this particular EA has no idea and is just trying to convince you/your son to continue with the purchase by saying things they think you want to hear.

Your solicitor is the only party that can give you advice about the set up of this particular property.  They are acting for you and if you don't understand the lease documents, then your solicitor should advise.

However, a peppercorn ground rent and a 999 lease length should not be a cause for concern.  If there are seven owner occupiers, it may be that the intention is for the freeholder to set up a management company of which each flat's owners have a share in the company, but this is for you to ask your solicitor.

Thanks, I am not asking the seller EA for any advice, as per my OP, I said they have given this information and we have found out just recently it's either fake or false. Thanks