Buying a share of freehold: What percentage? Difficult majority freeholder?

aspermylastemail

Our very first post ☺️ Looking for advice 🙏

We are leaseholders in a block of 10 flats. Our share of the service charge is 15%. The lease length is 120 years.

Currently, 15% of the freehold is for sale, either as a whole or split between leaseholders.

What are the benefits of buying a share of the freehold? Our understanding is that it makes it easier to extend the lease. If so, does it matter whether we buy the full share (15%, matching our service charge share) or less? In other words, could we buy a smaller percentage and still benefit from the same rights? Obviously, we would receive a smaller share of the ground rent. 

Once we are freeholders, what would be the process to extend the lease? There is a difficult majority freeholder on the board. Could they block us from extending?

Is there anything else we should consider?

Thank you 😊

MyRealNameToo

aspermylastemail said:

Our very first post ☺️ Looking for advice 🙏

We are leaseholders in a block of 10 flats. Our share of the service charge is 15%. The lease length is 120 years.

Currently, 15% of the freehold is for sale, either as a whole or split between leaseholders.

What are the benefits of buying a share of the freehold? Our understanding is that it makes it easier to extend the lease. If so, does it matter whether we buy the full share (15%, matching our service charge share) or less? In other words, could we buy a smaller percentage and still benefit from the same rights? Obviously, we would receive a smaller share of the ground rent. 

Once we are freeholders, what would be the process to extend the lease? There is a difficult majority freeholder on the board. Could they block us from extending?

Is there anything else we should consider?

Thank you 😊

Just 15% is for sale or all of its for sale and you are thinking of buying 15% of it?

Generally you find out how many of the leaseholders want to buy and then share it out across them evenly, in our last place the development was about 230 units and about 200 participated in the buyout of the freehold. The remaining 30 are just leaseholders. 

Your voting rights will be aligned to the percentage you own so the smaller the percent the less say you have in any decisions put to the shareholders. It's important to understand the rules of the company, what requires a shareholder vote and if decisions are made by a simple majority or something else. 

So in theory one person could own 91% and the remaining flat owners 1% each and as such the person that owns 91% will make all the decisions as no one can outvote them even if all 9 of the others dont like their idea of brining in parking controls or extending their flat into the roof space or such. 

aspermylastemail

MyRealNameToo said:

aspermylastemail said:

Our very first post ☺️ Looking for advice 🙏

We are leaseholders in a block of 10 flats. Our share of the service charge is 15%. The lease length is 120 years.

Currently, 15% of the freehold is for sale, either as a whole or split between leaseholders.

What are the benefits of buying a share of the freehold? Our understanding is that it makes it easier to extend the lease. If so, does it matter whether we buy the full share (15%, matching our service charge share) or less? In other words, could we buy a smaller percentage and still benefit from the same rights? Obviously, we would receive a smaller share of the ground rent. 

Once we are freeholders, what would be the process to extend the lease? There is a difficult majority freeholder on the board. Could they block us from extending?

Is there anything else we should consider?

Thank you 😊

Just 15% is for sale or all of its for sale and you are thinking of buying 15% of it?

Generally you find out how many of the leaseholders want to buy and then share it out across them evenly, in our last place the development was about 230 units and about 200 participated in the buyout of the freehold. The remaining 30 are just leaseholders. 

Your voting rights will be aligned to the percentage you own so the smaller the percent the less say you have in any decisions put to the shareholders. It's important to understand the rules of the company, what requires a shareholder vote and if decisions are made by a simple majority or something else. 

So in theory one person could own 91% and the remaining flat owners 1% each and as such the person that owns 91% will make all the decisions as no one can outvote them even if all 9 of the others dont like their idea of brining in parking controls or extending their flat into the roof space or such. 

Thanks MyRealNameToo ☺️

Only 15% is for sale, as an existing minority freeholder is selling their share.

The majority freeholder has been making all decisions with little consideration for the minority freeholders. Unfortunately, we don’t expect this to change.

It’s unclear whether their control is limited to decisions for the building as a whole or extends to individual flats. In other words, once we become freeholders, can we make decisions unilaterally for our flat or do we still need approval from the board? Likely the latter… And if so, could the majority freeholder simply block our lease extension request?

MyRealNameToo

aspermylastemail said:

MyRealNameToo said:

aspermylastemail said:

Our very first post ☺️ Looking for advice 🙏

We are leaseholders in a block of 10 flats. Our share of the service charge is 15%. The lease length is 120 years.

Currently, 15% of the freehold is for sale, either as a whole or split between leaseholders.

What are the benefits of buying a share of the freehold? Our understanding is that it makes it easier to extend the lease. If so, does it matter whether we buy the full share (15%, matching our service charge share) or less? In other words, could we buy a smaller percentage and still benefit from the same rights? Obviously, we would receive a smaller share of the ground rent. 

Once we are freeholders, what would be the process to extend the lease? There is a difficult majority freeholder on the board. Could they block us from extending?

Is there anything else we should consider?

Thank you 😊

Just 15% is for sale or all of its for sale and you are thinking of buying 15% of it?

Generally you find out how many of the leaseholders want to buy and then share it out across them evenly, in our last place the development was about 230 units and about 200 participated in the buyout of the freehold. The remaining 30 are just leaseholders. 

Your voting rights will be aligned to the percentage you own so the smaller the percent the less say you have in any decisions put to the shareholders. It's important to understand the rules of the company, what requires a shareholder vote and if decisions are made by a simple majority or something else. 

So in theory one person could own 91% and the remaining flat owners 1% each and as such the person that owns 91% will make all the decisions as no one can outvote them even if all 9 of the others dont like their idea of brining in parking controls or extending their flat into the roof space or such. 

Thanks MyRealNameToo ☺️

Only 15% is for sale, as an existing minority freeholder is selling their share.

The majority freeholder has been making all decisions with little consideration for the minority freeholders. Unfortunately, we don’t expect this to change.

It’s unclear whether their control is limited to decisions for the building as a whole or extends to individual flats. In other words, once we become freeholders, can we make decisions unilaterally for our flat or do we still need approval from the board? Likely the latter… And if so, could the majority freeholder simply block our lease extension request?

Need to read the rules of the company... the Directors will typically deal with day to day matters and only major decisions get put to the shareholders. If there is a shareholder with over 50% of the shares then they basically can make all the decisions if it's a simple majority setup. 

At our friends flat almost all decisions go to the shareholders for a decision, at the moment they are discussing a programme of works to replace the windows in all the units and considering how to phase it or do them all at once and also what to do with the small number of flats that had already replaced their own windows. They require a 66% vote in favour to pass a decision so there can be horse trading with some offering to support others on what they want to propose in exchange for support on their proposal on this. 

It's not that you get the sole vote in relation to things that are to do with your flat. Generally things that impact single flats probably dont normally go to a vote unless it's someone wanting to build an extension or go into the loft etc which will impact others in the development. 

aspermylastemail

MyRealNameToo said:

aspermylastemail said:

MyRealNameToo said:

aspermylastemail said:

Our very first post ☺️ Looking for advice 🙏

We are leaseholders in a block of 10 flats. Our share of the service charge is 15%. The lease length is 120 years.

Currently, 15% of the freehold is for sale, either as a whole or split between leaseholders.

What are the benefits of buying a share of the freehold? Our understanding is that it makes it easier to extend the lease. If so, does it matter whether we buy the full share (15%, matching our service charge share) or less? In other words, could we buy a smaller percentage and still benefit from the same rights? Obviously, we would receive a smaller share of the ground rent. 

Once we are freeholders, what would be the process to extend the lease? There is a difficult majority freeholder on the board. Could they block us from extending?

Is there anything else we should consider?

Thank you 😊

Just 15% is for sale or all of its for sale and you are thinking of buying 15% of it?

Generally you find out how many of the leaseholders want to buy and then share it out across them evenly, in our last place the development was about 230 units and about 200 participated in the buyout of the freehold. The remaining 30 are just leaseholders. 

Your voting rights will be aligned to the percentage you own so the smaller the percent the less say you have in any decisions put to the shareholders. It's important to understand the rules of the company, what requires a shareholder vote and if decisions are made by a simple majority or something else. 

So in theory one person could own 91% and the remaining flat owners 1% each and as such the person that owns 91% will make all the decisions as no one can outvote them even if all 9 of the others dont like their idea of brining in parking controls or extending their flat into the roof space or such. 

Thanks MyRealNameToo ☺️

Only 15% is for sale, as an existing minority freeholder is selling their share.

The majority freeholder has been making all decisions with little consideration for the minority freeholders. Unfortunately, we don’t expect this to change.

It’s unclear whether their control is limited to decisions for the building as a whole or extends to individual flats. In other words, once we become freeholders, can we make decisions unilaterally for our flat or do we still need approval from the board? Likely the latter… And if so, could the majority freeholder simply block our lease extension request?

Need to read the rules of the company... the Directors will typically deal with day to day matters and only major decisions get put to the shareholders. If there is a shareholder with over 50% of the shares then they basically can make all the decisions if it's a simple majority setup. 

At our friends flat almost all decisions go to the shareholders for a decision, at the moment they are discussing a programme of works to replace the windows in all the units and considering how to phase it or do them all at once and also what to do with the small number of flats that had already replaced their own windows. They require a 66% vote in favour to pass a decision so there can be horse trading with some offering to support others on what they want to propose in exchange for support on their proposal on this. 

It's not that you get the sole vote in relation to things that are to do with your flat. Generally things that impact single flats probably dont normally go to a vote unless it's someone wanting to build an extension or go into the loft etc which will impact others in the development. 

Thanks 😊 

Tricky one! And it sounds like terms vary: simple majority or 66%, like at your friend's.  

We have an RTM in place, so management has been delegated to a third party. But it’s still unclear how extension requests would play out. You mentioned that such a decision would be unlikely to go to a vote, but does that mean it’s at the majority freeholder’s discretion? 

It would be pointless buying a share of a freehold only to have our extension request blocked by the majority freeholder 😬 

gm0

If an SOF company has directors.  And the majority voting interest likely is one - if not the only one currently.  

Then they can agree lease extensions as discretion. And get the agent and hired legal help to do the paperwork.  They would be unwise to do this for silly money - wildly different to the statutory value. As that strays from their responsibilities to the company.  Higher fine.  Too much discount for mates - less so.  

But refusing to negotiate a price the lessee wants and suggests - is allowed.  
The lessee then has to explore their statutory option to do it anyway - at the statutory calculation price.  Notices served, valuation done, conventions for lawyers etc etc.  

You likely need a leasehold/extension lawyer to look at your situation and reassure you that you have the fallback of the forced statutory route against a failed negotiation.  Accepting that it takes longer and can still be made painful by people playing up and delaying things along the way.  Doing this on the clock to sell is unhelpful.

The freehold interest is tricky.  If it doesn't impact your lease extension - it doesn't sound that valuable here.  Don't know.  Legal question for your context.

It's different where you have 10 flats, one lease one member one vote.  Or one share each - fine.   The pain of democracy the least terrible of systems so far tried.  And you have incentives to agree something - balancing the cost focused with the good condition to sell focused folks.  Compromises.

But where a single somebody is the king and basically can tell you what is and is not happening.  
And also control the company shareholder voting to modify within the law - the policies and rules of the company.  

The thing they cannot do is unilaterally change your lease conditions
 
All you can do is hold them to due process, the lease obligations (as a leaseholder), company filings, meetings, the operating rules of the company (as a shareholder).  A much less comforting position.  With less value to you.  

And so less of a consideration should be paid to the exisitng owner disposing of it.  Why they are disposing of it is relevant.  They have discovered its lack of value. Cashflow crunch.  Anticipation of costs not rechargeable to leases which the freehold interest may need to pay.  Realisation that a future development value of the site is in fact illusory.  Listed structure liabilities with no ground rent anticipated later and little site value.  

Could be lots of reasons someone now wishes they hadn't bought it and no longer wants to own it.  Understanding them is sensible.

aspermylastemail

gm0 said:

If an SOF company has directors.  And the majority voting interest likely is one - if not the only one currently.  

Then they can agree lease extensions as discretion. And get the agent and hired legal help to do the paperwork.  They would be unwise to do this for silly money - wildly different to the statutory value. As that strays from their responsibilities to the company.  Higher fine.  Too much discount for mates - less so.  

But refusing to negotiate a price the lessee wants and suggests - is allowed.  
The lessee then has to explore their statutory option to do it anyway - at the statutory calculation price.  Notices served, valuation done, conventions for lawyers etc etc.  

You likely need a leasehold/extension lawyer to look at your situation and reassure you that you have the fallback of the forced statutory route against a failed negotiation.  Accepting that it takes longer and can still be made painful by people playing up and delaying things along the way.  Doing this on the clock to sell is unhelpful.

The freehold interest is tricky.  If it doesn't impact your lease extension - it doesn't sound that valuable here.  Don't know.  Legal question for your context.

It's different where you have 10 flats, one lease one member one vote.  Or one share each - fine.   The pain of democracy the least terrible of systems so far tried.  And you have incentives to agree something - balancing the cost focused with the good condition to sell focused folks.  Compromises.

But where a single somebody is the king and basically can tell you what is and is not happening.  
And also control the company shareholder voting to modify within the law - the policies and rules of the company.  

The thing they cannot do is unilaterally change your lease conditions
 
All you can do is hold them to due process, the lease obligations (as a leaseholder), company filings, meetings, the operating rules of the company (as a shareholder).  A much less comforting position.  With less value to you.  

And so less of a consideration should be paid to the exisitng owner disposing of it.  Why they are disposing of it is relevant.  They have discovered its lack of value. Cashflow crunch.  Anticipation of costs not rechargeable to leases which the freehold interest may need to pay.  Realisation that a future development value of the site is in fact illusory.  Listed structure liabilities with no ground rent anticipated later and little site value.  

Could be lots of reasons someone now wishes they hadn't bought it and no longer wants to own it.  Understanding them is sensible.

Thanks gm0 for your thorough post 🙏

The minority freeholders are directors too, including the ones selling their share of the freehold.  

We know from another freeholder that the lease extension cost them £1k each. We assumed it was the default amount and that we could benefit from the same treatment (of course, if the extension request is not blocked altogether!). 

From your post, it sounds like the majority freeholder could actually reject that figure.  

There is likely no value in the freehold for us 😬

We’re not sure what the freeholders’ motivation to sell is, but their pool of buyers is rather limited. We don’t expect outsiders to be interested in buying 15% of a small freehold in which they don’t own a leasehold. 

gm0

There is a value in SOF share.  Apart from what it owns.

Seat at the table

If a place goes into chaos - someone critical dies, directors all gone.  Agent contract expired or insolvent (if used).  Then it needs picking up again and renewing. SOF stakeholders need to do it.  

While that process happens.  Management packs, conveyancing inputs from freeholder + man co for sale of leases, service charge apportionment may all effectively stop.  And financial uncertainty about the communal may also deter lease buyers.  

Being a leaseholder *only* means you may then be "trapped" pending developments with no seat at the table.  

Asking a defunct company and perhaps the lawyer/executor of a former neighbour who is doing probate (for 2 years) on their leasehold and freehold interest.  To do more things - they won't be in a hurry to provide. An active unpaid voluntary director has disappeared. 

Being a freehold share means you have the seat at the table to get involved the fixing it conversation and process.  As part owner. With the opportunity - also comes some responsibility (as a shareholder) to do so.

Choose your risks and accept them.

ExEstateAgent

You have the right to extend your lease regardless. Owning a share of freehold doesn't make any difference to your ability to extend (although when the leaseholders of a block buy the freehold, they usually extend the leases to 999 years and zero the ground rent).