Freehold partners dispute

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    Freehold partners dispute

    There are two unrelated owners of a freehold property, (F1) with 80% and the second party (F2) with 20%. The shareholders are tenants in common. There is no written partnership or other agreement between F1 and F2 as regards the Freehold, the respective stakes in the freehold were purchased from the local council 15 years ago, with a property tenant who remained in place before and after the purchases made by F1 and F2.

    The property is currently leased to a Business (Company 1), that uses the property do motor vehicle repairs (i.e a panel beating shop), the lease is a 50 year lease that has 11 years left to run and who currently pays F1 and F2 a pro rata rental on the property.

    F2 is also a 51% shareholder and employee of Company 1.

    There is a looming dispute, which concerns Company 1 (under directorship of Party B who owns 51% of the company), where the company has made several structural alterations and built new structures onto the property without notifying F1 who is the majority leaseholder. This is potentially a problem - whereas F1 intends to claim in the next rent review that the value of the property has increased and must take into account all additional buildings and alterations completed, with or without the permission of F1. Furthermore these additional structures which have been erected without F1's consent should revert to ownership of the Freeholders at the end of the current lease These looming disputes are not the questions or the main problem of this case, but form a background on the problem; which is:

    F2 has now informed F1 by email, that he is transferring his 20% free-holding ownership to Company 1. This transfer has probably being constructed to give Party B a method to escape CGT on his holding in the property, and might have been sold at an undervalued amount to the business to achieve this, or even "gifted" to the business.

    Party A feels that he has not agreed or consented to this transfer of ownership and this will create problems down the line when the rent review is completed and when the lease is up for renewal. There is a conflict of interest in F2 selling or gifting his 20% to the current tenant (Company 1), especially since Party B is a majority shareholder in Company 1.

    F1 has provisionally informed F2 that he does not consent to the transfer of ownership.

    F1 has offered F2Party B a 20% cash value of the property to buy F2's 20% stake, which he has declined.


    The question is, what is F1's rights and F2's responsibilities in this scenario - and is there a case for a duty of care between F1 and F2 in this free-holding arrangement that is not supported by a unified free-holding agreement.

    Some pointers would be much appreciated, I do have access to Lexis Law Library and all other Law Reporting publications, if anyone is able to provide any legal precedent on this matter.

    Thanks :-)

    #2
    There are two separate things - being named on the title and being an owner of the interest in a share.

    A co-tenant in common can transfer the beneficial interest (effectively ownership) of his share to whoever or whatever he wants - it has nothing at all to do with other co-owners and they do not even have to know about it.

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