Anyone with practical experience of Freehold Enfranchisement?

sarahsimsfan

Hi

6 of the flats in my building of 7 flats are interested in purchasing the Freehold and we have met to discuss this.

I've bought the Survivor's Guide to buying a freehold and I feel pretty comfortable with the procedures we need to go through but even at the outset we have run into one issue that I'm not sure what to do about and I've got a couple of other concerns too!

The first issue is that we all agreed to pay £200 to cover the Surveyor's fees (£940 inc VAT) and to leave a little extra. One of the flats has said they can't afford £200 at the moment and to make it fair could we all pay in £100 instead. I've already said that wouldn't work as it wouldn't be enough to cover the fees!

Now a couple of months ago, this flat undertook some work outside due to damp in their flat. The cleared a lot of rubbish that had built up at the side of the building, dug out the side and filled it with gravel and put up a new bit of fence so that rubbish wouldn't accumulate there again. At the time I said they should have asked the Freeholder to do it as we should all be responsible for the costs and they said they didn't mind.

I actually think it would probably be "fair" if they paid in less than the rest of us at this point as they already paid out for that work which, although it only directly affected their flat, was actually maintenance to the common parts.

The problem is, if they can't afford that other £100 now, what will happen when we have to pay for the solicitor's fees, the Freeholder's fees and, biggest of all, the actual premium for the Freehold itself (likely to be around £10k but obv waiting for surveyor)?

Should they think about not taking part? Can the rest of us insist that if they can't pay the first contribution they can't participate? Would it be out of order of me to have a chat with them about their finances and whether they would actually be able to afford to go through with this? I don't want it all to go through and then discover that the rest of us have to find the money to cover them! I'm by no means flush myself (they're a couple and most of the rest of us are on our own) but I can afford to do it because a) I'm good at saving (thanks Martin!); and b) I've already spoken to my mortgage company about an additional loan for the Freehold premium.

Has anybody ever run into anything like this?

The other concern is probably down to me being a control freak. At our intial meeting tasks were assigned and the lady who is supposed to be looking into the bank account went to her own bank (Nationwide) and has got details of their clubs and associations account. I know we will all have to produce proof of identity under Money Laundering rules but she seems under the impression that we will all have to troop off to the bank together as some sort of building outing! Aside from the difficulty of getting everyone together during working hours at the same time, I'm sure that isn't necessary and we could all go in individually to provide proof of identity?

Plus, whilst we're just at the stage of getting a Valuation done (which may come to nothing if they say its £20k each or something!) should we be getting a bank account or should we just ask someone to hold the money?

Thanks in advance!

Sarah

Richard_Webster

In practical terms, if 6 people want to buy a freehold all 6 can't have their names registered at the Land Registry so it would be more sensible to set up a company called something like Bloggs Court Somewhere Limited or 75 Some Street Limited. The company will then buy the freehold as your nominee and the directors only would have to produce ID to the bank/building society.

You do need to have a serious talk with the couple concerned because they may not realise what is involved cost wise and everyone else will probably have to pay more. Don't go down the road of one of you taking two shares in the company and paying double because it will be difficult to get that money back in the future!

Also do I assume that the freeholder isn't prepared to offer any terms at all for the sale of the freehold without you going through the statutory procedures? If you have not contacted the freeholder, then I would try that first and you might save on the surveyor's fees.

There are some helpful people on the Long Leasehold section of the http://www.landlordzone.co.uk/forums/
who may be able to give you an idea as to whether any figure offered by the freeholder is fair and reasonable. Sometimes when you take into account the cost of using a surveyor and a solcitor to got through the statutory route it may be worth paying an extra £1,000 to the freeholder or so just to save the costs.

martinman3

Just to expand on something that RW mentioned, not all the leaseholders need to be directors. It is better to appoint just two who have the authority to liase with surveyors, freeholder, solicitor etc, then they would also be the only ones to sign cheques. You can always appoint other directors later if necessary. Note, directors cannot be bankrupts.

You will also find that if you give tasks to everyone, some will not complete them due to other comittments and it is better to acknowledge now that some leaseholders should only be there to write a cheque when it is required.

sarahsimsfan

Thanks guys!

I actually did have a money talk with the couple concerned last night, they asked me if I'd mind discussing it with them so I didn't have the awkwardness of bringing it up. They have talked to their families about it and now feel better and, after what they said, so do I!

We have spoken to the Freeholder about the purchase and they are willing to do it privately rather than through enfranchisement but still require us to have the surveyor's valuation carried out.

If we're paying for that anyway, I'd much rather use the enfranchisement process because our Freeholders are slooooooooooooooowwwwww. If we did it privately I'd estimate it to take at least 6 years! At least through enfranchisement they'd be made to stick to statutory time limits!

Thanks again!

martinman3

If we're paying for that anyway, I'd much rather use the enfranchisement process because our Freeholders are slooooooooooooooowwwwww. If we did it privately I'd estimate it to take at least 6 years! At least through enfranchisement they'd be made to stick to statutory time limits!

But the risk is that the freeholder will raise the price because of their increased costs and there is also the possiblility that they will find out that the market value is higher than the figure you can negotiate privately.