Share of freehold bought without consent of freeholder?

HiroA

I've received a reply from A & B. Their solicitor says I cannot join the enfranchisement now, but they are happy to buy the third of freehold as in the terms in their notice, which is not great but not too bad, apart from them wanting to make their front and backgardens as communal space so I will discuss that. On completion of the freehold purchase I will be issued a share of the freehold company so that I am guaranteed an equal share in the freehold..  I need to confirm that if I can be the director of the company. 

They say only if the voluntary agreement is successful they would cover our legal fees.  I have to ask what happens if they change their mind because that's why the last 2 lease extension attempts were not completed (one was even statutory).   I never changed my mind.  Last time, after we had instructed our lawyers, they even said that if the transaction was not completed within one month they will stop the process and we will be liable for the costs up to that point.

They say they won't withdraw the notice to protect themselves in case the voluntary arrangement did not materialise, so I will have to tell them that I will have to make a county court claim to protect my interets otherwise I am at their mercy -  I won't be able to declare their notice invalid by way of counter notice, in fact I won't be able to issue counter notice at all as A is not expected to sign, so if I don't do this the enfranchisement can take place automotically after 2 months deadline.

eddddy

I don't fully understand the plan, but...

• Your flat contributes roughly £0 to the value of the freehold (assuming 999 year lease and no ground rent)
• A's flat contributes roughly £0 to the value of the freehold (assuming 999 year lease and no ground rent)
• B's flat contributes roughly 100% of the value of the freehold (assuming a lease that is getting short, and ground rent is payable).

So a fair outcome would probably be for B to pay you 50% of the value of the freehold, and B to pay A 50% of the value of the freehold - and you end up as joint owners, each owning 33.3%.

HiroA said:

...apart from them wanting to make their front and backgardens as communal space so I will discuss that. 

Obviously, that would involve a change to all 3 leases. If you refuse to agree, there is no way that they can force you to accept a change to your lease.

But maybe you'd voluntarily agree as part of the negotiation process.

HiroA

eddddy said:

I don't fully understand the plan, but...

• Your flat contributes roughly £0 to the value of the freehold (assuming 999 year lease and no ground rent)
• A's flat contributes roughly £0 to the value of the freehold (assuming 999 year lease and no ground rent)
• B's flat contributes roughly 100% of the value of the freehold (assuming a lease that is getting short, and ground rent is payable).

So a fair outcome would probably be for B to pay you 50% of the value of the freehold, and B to pay A 50% of the value of the freehold - and you end up as joint owners, each owning 33.3%.

HiroA said:

...apart from them wanting to make their front and backgardens as communal space so I will discuss that. 

Obviously, that would involve a change to all 3 leases. If you refuse to agree, there is no way that they can force you to accept a change to your lease.

But maybe you'd voluntarily agree as part of the negotiation process.

eddddy said:

I don't fully understand the plan, but...

• Your flat contributes roughly £0 to the value of the freehold (assuming 999 year lease and no ground rent)
• A's flat contributes roughly £0 to the value of the freehold (assuming 999 year lease and no ground rent)
• B's flat contributes roughly 100% of the value of the freehold (assuming a lease that is getting short, and ground rent is payable).

So a fair outcome would probably be for B to pay you 50% of the value of the freehold, and B to pay A 50% of the value of the freehold - and you end up as joint owners, each owning 33.3%.

HiroA said:

...apart from them wanting to make their front and backgardens as communal space so I will discuss that. 

Obviously, that would involve a change to all 3 leases. If you refuse to agree, there is no way that they can force you to accept a change to your lease.

But maybe you'd voluntarily agree as part of the negotiation process.

Yes, the third of freehold we are selling to B will reflect  B's premium which will be 100% of the value of the freehold, and it will be shared 50/50 between A & I. Then all 3 of us will be owing 33.3% each.  I think B has now realised that enfranchisement costs a lot more than voluntary arrangement.

ExEstateAgent

As eddddy has pointed out, the leases cannot be changed unless ALL parties agree. Owning the freehold doesn't affect the leases. If a lease needs to be extended, for example, the freeholder is still due to be paid the going rate (unless they agree otherwise), and if the gardens are communal they cannot be made private or vice versa. 

You may wish to point this out to your neighbours. 

HiroA

I wil have to make the claim myself as it would be just too expensive to use a solicitor.  I don't seem to find any practical information but  think I need to use  N1 form - you can use it for both money and non-money claim and is the standard form to start a case at county court. I will pay a court fee for standard "non-money" claim.

HiroA

I think there have been misunderstanding and they insist that their company purchases freehold from landlord meaning that I join the company on completion as director, not before the transaction, which I am not very comfortable with.  Also, in this way Russell and I still have to have separate lawyers due to conflict of interest as Russell is both buyer and seller, being the director of the company.

I spoke to another solicitor and following her advice, I just mentioned that the enfranchisement claim is not possible under Trusts of Land and Appointment of Trustees Act 1996 but that it shouldn't be a problem if the voluntary agreement goes ahead.  B said they will not entertain assertions that are not joint positions from both freeholders and are not formally communicated to our solicitor, and that I should discuss this with A, and asked me to instruct a solicitor early next week if I accept the offer.

B also said that the front and back gardens will be included in the purchase, otherwise A and I will still own this land (doesn't make sense to me), not the company, and that our leases will determine access and maintenance of the gardens and that our leases will not be changed.  It's strange that the register of title says the land has the benefit of a right of way over the land tinted "brown" only, the title plan does not include front and back garden, and that the previous tenant even sold part of the backgarden to the house on the other side.

HiroA

So the other solicitor I spoke to today, she was interested in the case as it's her speciality and she knew a few senior advisors who also advise at LEASE so wanted to know who told me about "Cade vs Izard" case etc. She was nice enough to give me free advice for now, and strongly reccomended not to make a claim to county court now, as  it will cost lots of money and time and stress, and that regardless of the outcome it might make the relationship even worse.  She instead recommended that I try to negotiate a deal with them as we have 2 months, just mentioning that the notice is inadmissable but that my aim is to reach a negotiation not court action. If the negotiation fails I can tell their solicitor and also serve counter notice (sort of ) saying that because the notice is inadmissable and void, coutner notice could not have been served, at least in a normal manner, as the joint freeholder is also claiming to be a qualifying tenant and therefore should not and cannot sign and serve the coutner notice due to conflit of interest. 

That will at least prohibit them from applying for a vesting order because I am still in touch with them and communicated that the notice is void.  She said they will then have to go to court to prove that their notice is valid etc. She said that that's when her team can help and asked me to come back then, if needed.

eddddy

HiroA said:

B also said that the front and back gardens will be included in the purchase, otherwise A and I will still own this land (doesn't make sense to me), not the company, and that our leases will determine access and maintenance of the gardens and that our leases will not be changed. 

So it sounds like you might have misunderstood the situation with the garden.

The freehold of the property includes the garden. But if A and B buy the freehold (including the garden), that doesn't mean the garden 'magically' becomes a communal garden.

The rights to use the garden stay unchanged, and the responsibilities for maintenance (and paying for maintenance) stay unchanged.

i.e. If your lease doesn't say you're responsible for the cost of maintaining the trees in the garden now, you won't become responsible for the cost of maintaining the trees - as a result of anyone buying the freehold.

HiroA

eddddy said:

HiroA said:

B also said that the front and back gardens will be included in the purchase, otherwise A and I will still own this land (doesn't make sense to me), not the company, and that our leases will determine access and maintenance of the gardens and that our leases will not be changed. 

So it sounds like you might have misunderstood the situation with the garden.

The freehold of the property includes the garden. But if A and B buy the freehold (including the garden), that doesn't mean the garden 'magically' becomes a communal garden.

The rights to use the garden stay unchanged, and the responsibilities for maintenance (and paying for maintenance) stay unchanged.

i.e. If your lease doesn't say you're responsible for the cost of maintaining the trees in the garden now, you won't become responsible for the cost of maintaining the trees - as a result of anyone buying the freehold.

That's  good news!  The only thing  that bothers me is that they say they would only let me join the company on completion, not before - I don't feel I have much protection. 

According to the advice from the latest solicitor, this sort of enfranchisement claim may ony be accepted as an exemption when landlord seriously fails to manage the property, reducing the value etc.  

eddddy

HiroA said:

That's  good news!  The only thing  that bothers me is that they say they would only let me join the company on completion, not before - I don't feel I have much protection. 

I guess you need a legally binding agreement stating that will happen - and the agreement also contains all the important terms of the joint freehold ownership.

I would use a solicitor to do that, but I know you want to avoid that.

HiroA said:

According to the advice from the latest solicitor, this sort of enfranchisement claim may ony be accepted as an exemption when landlord seriously fails to manage the property, reducing the value etc.  

As you're finding out, the law around these things isn't clear-cut. Different lawyers have different opinions.

You've mentioned one case ("Cade vs Izard") which apparently supports your opinion, another lawyer might find other cases which don't support your opinion.

If it ends up in court/tribunal, it would be case of both sides arguing their case - based on how each party interprets the legislation, any case law that each party can find, any precedents that each party can find, etc.

If A and B hire a super-experienced lawyer who knows the legislation, case law, precedents, etc really well, you might find it challenging to 'beat' them.