[Help] Help needed with freehold query, please.

[Binney on acid]

Wifey and I are looking to buy a flat in a block of 12. Seven of the flat owners own the freehold between them and formed a limited company. The one we are looking at is one of the five that don't have a share of the freehold. Apparently the 7 people who own it had a meeting and decided not to sell any more portions of the freehold to the 5 leaseholders, whose leases have another 108 years to run.
Am I right to feel a bit vulnerable here? Is there any way we could get them to reconsider letting us buy 1/12 of the freehold? How much would this affect the price of the flat that we are looking to buy?
Thank god the flat doesn't have a lift, but does have a communal garden.

 

[Originunknown]

Look for a freehold alternative. The lease has the potential to cause you issues in the future and will certainly affect the resale value if you are not able to renew it at a reasonable cost.

 

[Brian Parsons]

Don't touch with a ten foot barge pole. Leaseholds are a banana skin. Friend of mine has a flat in Newcastle. He is on his third management company/ leaseholder in 5yrs.

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[Springal]

Yeah avoid even if not immediately problematic, selling it will limit potential buyers

 

[Brok]

Look for somewhere else. Really.

 

[Chicken Run]

Ask them how much for a lease extension to say 150 years.

 

[East Staffs Gull]

I don’t see a problem myself. The seven owners of the freehold of the building will still be leaseholders, who all have to be treated equally and fairly. There will continue to be 12 leaseholders, albeit that 7 of them own a share or shares in the freehold company, which presumably is also the management company.

I still think that you would be in a better position in this situation than buying a leasehold in a block where the leaseholders haven’t exercised their right to manage and would be at the mercy of a commercial Landlord. I’d rather have some of my fellow leaseholders as the landlord.

There would also be the possibility that the 7 might at some point be willing to issue a share or shares to you, once they have got to know you.

 

[Super Steve Earle]

Wifey and I are looking to buy a flat in a block of 12. Seven of the flat owners own the freehold between them and formed a limited company. The one we are looking at is one of the five that don't have a share of the freehold. Apparently the 7 people who own it had a meeting and decided not to sell any more portions of the freehold to the 5 leaseholders, whose leases have another 108 years to run.
Am I right to feel a bit vulnerable here? Is there any way we could get them to reconsider letting us buy 1/12 of the freehold? How much would this affect the price of the flat that we are looking to buy?
Thank god the flat doesn't have a lift, but does have a communal garden.

If you feel vulnerable now, don't do it. It will only give you sleepless nights once you are in.

 

[beorhthelm]

the basic situation is no different to a normal leasehold flat, you own the lease and the freeholder/management company wil take care of communal areas, roofs, drains etc. it just happens some of your neighbours are the freeholder. it odd that not all the flat are shareholders its not significant as a leasholder other than you want be along to managment meeting or have vote on changes - the same as millions of other leasholder flats.

probably worth speaking with the freeholder group/managment company to find out why they wont distribute shares to other flats, might be history with the leaseholders, but i dont really see why it will be a problem.

 

[Perkino]

Better than having an external owning the freehold. The 7 will meet together and decide if something needs repairing which if it affects or inconveniences one of them they surely will look to make improvements. I imagine they have been stung by an individual and want to steer clear until you've been there a while

 

[East Staffs Gull]

the basic situation is no different to a normal leasehold flat, you own the lease and the freeholder/management company wil take care of communal areas, roofs, drains etc. it just happens some of your neighbours are the freeholder. it odd that not all the flat are shareholders its not significant as a leasholder other than you want be along to managment meeting or have vote on changes - the same as millions of other leasholder flats.

probably worth speaking with the managment company to find out why they wont distribute shares to other flats, might be history with the leaseholders, but i dont really see why it will be a problem.

I think that it only needs a majority of the leaseholders to agree to buy the freehold. It might be that once seven had signed up, they pressed ahead without the others. Alternatively, some of the other leaseholders might not have been supportive, or failed to respond or were simply disinterested.

 

[drew]

Better than having an external owning the freehold. The 7 will meet together and decide if something needs repairing which if it affects or inconveniences one of them they surely will look to make improvements. I imagine they have been stung by an individual and want to steer clear until you've been there a while

Surely this. At the end of the day, why not speak to them before backing out. You must like the flat so find out more before walking away from what might be an ok situation.

 

[Goldstone1976]

the basic situation is no different to a normal leasehold flat, you own the lease and the freeholder/management company wil take care of communal areas, roofs, drains etc. it just happens some of your neighbours are the freeholder. it odd that not all the flat are shareholders its not significant as a leasholder other than you want be along to managment meeting or have vote on changes - the same as millions of other leasholder flats.

probably worth speaking with the freeholder group/managment company to find out why they wont distribute shares to other flats, might be history with the leaseholders, but i dont really see why it will be a problem.

Better than having an external owning the freehold. The 7 will meet together and decide if something needs repairing which if it affects or inconveniences one of them they surely will look to make improvements. I imagine they have been stung by an individual and want to steer clear until you've been there a while

These, with a caveat on the emboldened sentence. The problem that can arise in any F/H shared between the leaseholders of the flats is a total inability to reach a decision to do anything, with the result that nothing gets done. In my experience, problems arise due to a disparity in financial resources of the freeholding leaseholders, &/or a genuine disagreement about the scope of works that should be done, &/or simple personal dislike between them!

Whilst, on paper, it’s very attractive to own part of the F/H, it can end up in a situation where there’s real anger between neighbours.

 

[Lower West Stander]

Be very very careful.

The management company which owns the freehold will have a constitution and directors appointed by the shareholders.

They will have the ability to make decisions relating to maintenance etc without recourse to those who only hold the lease.

I own an investment flat where this has caused a real stink - the management company has decided to ban all residents on the complex from owning pets, with no consultation whatsoever. There’s all kinds of legal stuff going on.

I’m sure other advice on here is well given, but personally I wouldn’t touch that flat with a barge pole. You are also vulnerable to one of the freehold owning flats selling and a dickhead coming in who wants to change things. I’ve experienced that too with another one of my investment properties.

A real minefield


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[Binney on acid]

Some fantastic advice here. Really appreciate it. The flat is beyond belief and is virtually unique. The location is to die for. They freeholders run a very tight ship, which prevents anyone from taking liberties. I just don't fancy being at their mercy. Although I don't suspect them of exploiting the situation, people tend to buy freeholds to make money and to protect their own interests. I feel the need to protect my own interests and may not be presented with an opportunity to achieve this.

 

[Gazwag]

Alternatively, some of the other leaseholders might not have been supportive, or failed to respond or were simply disinterested.

or simply couldn't afford it

 

[Bad Ash]

What would concern me would be lease extension. Would there be anything stopping the 7 freehold owners extending their own leases to 999 years for £1, but when one of the 5 non-freehold owners ask to extend they would request £££?

 

[Chicken Run]

What would concern me would be lease extension. Would there be anything stopping the 7 freehold owners extending their own leases to 999 years for £1, but when one of the 5 non-freehold owners ask to extend they would request £££?

IIRC the cost of a lease extension is a calculation based on sqm and ground rent paid, there are many companies who will act on your behalf in leasehold extension negotiations with the freeholder.

If a genuine figure can’t be agreed a tribunal will sit and often find in favour of the leaseholder which means any legal costs will be awarded in favour of leaseholder, this in itself in most cases deters freeholders offering anything other than a “going rate” cost.

One question I would ask is how many of the seven freeholders actually live in the block?

 

[Binney on acid]

Bearing in mind Brexit uncertainty and a general stagnation of the housing market, we offered 85% of the asking price yesterday expecting a rejection. Not only was our offer rejected, but the vendor has withdrawn the property from sale.

 

[East Staffs Gull]

Bearing in mind Brexit uncertainty and a general stagnation of the housing market, we offered 85% of the asking price yesterday expecting a rejection. Not only was our offer rejected, but the vendor has withdrawn the property from sale.

Having run background checks on you, the Freehold Seven have clearly had a quiet word with your vendor! ��