Share of freehold bought without consent of freeholder?

HiroA

I've just spoken to the advisor from LEASE.

First, I asked on another thread (seems to have disappeared) if you can sell a flat and retain the share of freehold.  Yes, you can.  But if the buyer asks for the share, you must transfer it to them.

Second, A cannot sell his 50% share to the company he set up with B so that A could sell part of his share to B.  It just cannot happen legally in our case, and the Declaration of Trust rules.  

So why have they set up a company?  The advisor told me something but I'd rather not disclose it here as I don't want to give ideas to others, but I wasn't wrong when I asked if I still have 50% share in my original post. 

I have asked for an advice from a lawyer that was recommended by my old lawyer, so see what he says, and see if it really applies to our case and if our DoT will still rule. 

eddddy

I guess it's possible that the other 2 leaseholders have created the company as part of a plan to...

• 1) Compulsorily take over management of the building, using the "Right to Manage" legislation

• 2) Compulsorily purchase the freehold, using "Collective Enfranchisement" legislation

The other 2 would have to invite you to join them, if they are planning to use the "Right to manage" legislation.


But from what I can see,  the other 2 might be able to purchase the freehold, without inviting you to join them - so it's possible that you could be frozen out.

DE_612183

HiroA said:

Second, A cannot sell his 50% share to the company he set up with B so that A could sell part of his share to B.  It just cannot happen legally in our case, and the Declaration of Trust rules.  

Not sure if you have asked the right question - what A has done is transferred / sold his 50% share to Company C.

Then he may have sold SHARES in Company C to Person B.

So the freehold has not been diluted, it's just more than one person has a say in it.

It's the same as if Person A got married, then Person A and Mrs A would have a say in what happens with 50% share they now jointly own.

HiroA

I had a reply from the lawyer.  He was nice enough to give me an advice for free and asked me to come back to him if I want to, when a notice is served or a claim is made, as at this stage his advice would be very limited and hypothetical.

He has seen our Declaration of Trust and his advice was the same as the advisor from LEASE.  A and B can collectively purchase the freehold from me and A, the option 2 of eddddy’s post above.

He said the costs of the enfranchisement process are usually significant and recommended to renew efforts to speak with them to try and come to a voluntary arrangement where each flat has a share of the freehold.

 

eddddy

HiroA said:

A and B can collectively purchase the freehold from me and A, the option 2 of eddddy’s post above.

He said the costs of the enfranchisement process are usually significant and recommended to renew efforts to speak with them to try and come to a voluntary arrangement where each flat has a share of the freehold.

If A and B are planning to use 'collective enfranchisement' to buy the freehold (without including you)...

• a) As you say, they'll have a chunk of fees to pay

• b) You mentioned a lease extension, which suggests that the lease(s) are short. That will increase the cost of the freehold that A and B will have to pay.

• c) If the leases say that ground rent is payable, that will further increase the cost of the freehold that A and B have to pay

If that happened, it sounds like you would get 50% of the cost of the freehold...

... but you would no longer be a joint freeholder. So...

• You would no longer have a say in the management of the building

• When you eventually sell your flat it would be 'leasehold', not 'share of freehold' - which might impact the value a bit

• If you need a lease extension, A and B might be uncooperative, meaning you have to follow the statutory route - so pay full price for the extension, plus high fees.

So as your solicitor suggests, it might be best to find a way of resolving the disputes you're having with A and B.

HiroA

eddddy said:

HiroA said:

A and B can collectively purchase the freehold from me and A, the option 2 of eddddy’s post above.

He said the costs of the enfranchisement process are usually significant and recommended to renew efforts to speak with them to try and come to a voluntary arrangement where each flat has a share of the freehold.

If A and B are planning to use 'collective enfranchisement' to buy the freehold (without including you)...

• a) As you say, they'll have a chunk of fees to pay

• b) You mentioned a lease extension, which suggests that the lease(s) are short. That will increase the cost of the freehold that A and B will have to pay.

• c) If the leases say that ground rent is payable, that will further increase the cost of the freehold that A and B have to pay

If that happened, it sounds like you would get 50% of the cost of the freehold...

... but you would no longer be a joint freeholder. So...

• You would no longer have a say in the management of the building

• When you eventually sell your flat it would be 'leasehold', not 'share of freehold' - which might impact the value a bit

• If you need a lease extension, A and B might be uncooperative, meaning you have to follow the statutory route - so pay full price for the extension, plus high fees.

So as your solicitor suggests, it might be best to find a way of resolving the disputes you're having with A and B.

A and I extended the lease to 999 years when we bought the freehold several years ago, so I think the premium will largely reflect B's flat, which has 84 years left, so I think the price I receive may be roughtly about the same as if we sold the third of freehold to B.  I think having 990 plus years' lease should be good enough to sell it, some people don't like landlord responsibilities, but yes, I will not have the power and authority of landlord.

So as you and the solicitor suggest, I think A and I informally selling the third of freehold to B would be more time and cost effective for all parties.

I wonder why they bothered to set up a company as A and B could buy the freehold just as tenants in common, it's just two of them, but it may be their preference.  

I still haven't heard from A and B, but if they did say something, I will then try to make them convince that informal sales would be the best option in terms of costs and time, but it may be that they have nothing to say to me as they are preparing the application.

ExEstateAgent

eddddy said:

I guess it's possible that the other 2 leaseholders have created the company as part of a plan to...

• 1) Compulsorily take over management of the building, using the "Right to Manage" legislation

• 2) Compulsorily purchase the freehold, using "Collective Enfranchisement" legislation

The other 2 would have to invite you to join them, if they are planning to use the "Right to manage" legislation.


But from what I can see,  the other 2 might be able to purchase the freehold, without inviting you to join them - so it's possible that you could be frozen out.

Collective enfranchisement isn't an option here. 

I would guess the company was set up with the expectation of the freehold being split 3 ways. Unless the OP agrees to to sell then they will keep their 50%. 

The management is another matter - the OP seems to be saying that the other parties don't want to pay a service charge etc. so setting up a company to manage the building seems odd. The requirements set out in the lease apply regardless (i.e. if it says the common areas must be redecorated every 5 years etc). 

However, it is in each parties best interest to resolve their issues amicably, or else when coming to sell, the disputes will need to be declared which will almost certainly affect the saleability/value of the flats. 

eddddy

ExEstateAgent said:

eddddy said:

I guess it's possible that the other 2 leaseholders have created the company as part of a plan to...

• 1) Compulsorily take over management of the building, using the "Right to Manage" legislation

• 2) Compulsorily purchase the freehold, using "Collective Enfranchisement" legislation

The other 2 would have to invite you to join them, if they are planning to use the "Right to manage" legislation.


But from what I can see,  the other 2 might be able to purchase the freehold, without inviting you to join them - so it's possible that you could be frozen out.

Collective enfranchisement isn't an option here. 

Why not?

Both LEASE and the OP's lawyer seem to be saying Collective Enfranchisement is an option:

HiroA said:

I had a reply from the lawyer.  He was nice enough to give me an advice for free and asked me to come back to him if I want to, when a notice is served or a claim is made, as at this stage his advice would be very limited and hypothetical.

He has seen our Declaration of Trust and his advice was the same as the advisor from LEASE.  A and B can collectively purchase the freehold from me and A, the option 2 of eddddy’s post above.

He said the costs of the enfranchisement process are usually significant and recommended to renew efforts to speak with them to try and come to a voluntary arrangement where each flat has a share of the freehold.

What have you spotted that LEASE and the OP's lawyer have missed?

ExEstateAgent

eddddy said:

ExEstateAgent said:

eddddy said:

I guess it's possible that the other 2 leaseholders have created the company as part of a plan to...

• 1) Compulsorily take over management of the building, using the "Right to Manage" legislation

• 2) Compulsorily purchase the freehold, using "Collective Enfranchisement" legislation

The other 2 would have to invite you to join them, if they are planning to use the "Right to manage" legislation.


But from what I can see,  the other 2 might be able to purchase the freehold, without inviting you to join them - so it's possible that you could be frozen out.

Collective enfranchisement isn't an option here. 

Why not?

Both LEASE and the OP's lawyer seem to be saying Collective Enfranchisement is an option:

HiroA said:

I had a reply from the lawyer.  He was nice enough to give me an advice for free and asked me to come back to him if I want to, when a notice is served or a claim is made, as at this stage his advice would be very limited and hypothetical.

He has seen our Declaration of Trust and his advice was the same as the advisor from LEASE.  A and B can collectively purchase the freehold from me and A, the option 2 of eddddy’s post above.

He said the costs of the enfranchisement process are usually significant and recommended to renew efforts to speak with them to try and come to a voluntary arrangement where each flat has a share of the freehold.

What have you spotted that LEASE and the OP's lawyer have missed?

Collective enfranchisement has effectively already happened and two leaseholders own the freehold. One of them would be applying to buy their own freehold! I can't find anything online that covers this, just advice about 'normal' enfranchisement. I would advise the OP to go back and clarify the situation with LEASE. 

eddddy

ExEstateAgent said:

Collective enfranchisement has effectively already happened and two leaseholders own the freehold. One of them would be applying to buy their own freehold! I can't find anything online that covers this, just advice about 'normal' enfranchisement. I would advise the OP to go back and clarify the situation with LEASE. 

The Law Commission clarify that a second Collective Enfranchisement is possible.

In fact, Collective Enfranchisement can happen multiple times - not just twice.


The Law Commission discuss this in a paper is called: "Leasehold home ownership: buying your freehold or extending your lease.

(The paper is discussing possible future changes to the law, to restrict repeated Collective Enfranchisements.)


Here are couple of relevant extracts - you need to read both extracts, to see the relevance to this thread:

5.4 (4) It is possible for one faction of leaseholders (representing 50% of the flats in a building) to make a successful collective enfranchisement claim, only for another faction (representing the other 50%) to do so immediately thereafter. The result is that the ownership and management of the building can moves back and forth between the two groups – potentially repeatedly. This problem, which is most likely to arise in small buildings, is known as the “ping-pong problem”.

5.214... 
We do not agree, however, that it can be adequately addressed by increasing the participation requirement for a collective freehold acquisition claim to 51%, as some consultees have suggested. Successive claims would still be possible with a higher participation requirement, provided some participants in the original claim were prepared to join a group of leaseholders wishing to bring a later claim.

Link: https://assets.publishing.service.gov.uk/media/61b9ebc9d3bf7f055fce752b/ENF-Report-final__1_.pdf