Share of Freehold flats, insurance confusion

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

    Share of Freehold flats, insurance confusion

    I wonder if anyone can help me with a problem that my brother is having.

    He owns a share of freehold flat, it's a ground floor flat (+back garden) with 2 other flats above it. There is a management company for the 3 owners.

    There was building insurance for all 3 flats (all together), and recently it expired so it needed renewing.

    The owner of the flat above my brother (let's call him Mr B), informed my brother about the insurance needing renewal, but that it might be a good idea to shop around and maybe get a better deal with another company.

    Although all 3 directors of the management company are equals, Mr B has more experience and is kind of leading the way with this.

    My brother and Mr B had a disagreement soon after about something or other and are not on the best of terms.

    The insurance has expired now but Mr B has not said a word at all about what's going on. Are they continuing with the same company? Are they going to go with another one? We don't know.

    Mr C, the owner of the top flat, recently sent an email to both my brother and Mr B. I don't know the terminology but it was sent so that both could see it (CC or BCC?). Anyway, in the email he asked my brother why have the premiums gone up so much. I was confused, as this would imply that there is insurance. Yet, my brother has not been informed of anything.

    I noticed that Mr B has not responded to that email. My brother has also not responded but instead he has tried to call him several times but there has been no answer.

    I'm sensing that something fishy is going on.

    I called the insurance company that they were with, and I also called one that Mr B suggested in an email. Both said that thay are not currently providing insurance, in fact they are both waiting to hear from Mr B. This means that if is there is insurance, it is with another company.

    I think what might have happened is that Mr B has said to Mr C that they should get insured together, and leave my brother out. Personally I have no problem with this, because if my brother and Mr B aren't going to be able to get along, then it's best to keep things separate.

    However, seeing as all 3 are part of the same management company, I think it would be a stupid move on Mr B's part to do this, as sooner or later some issue might arise where Mr B might need cooperation from my brother.

    Anyway, what I'd like to know is :

    Is it possible for my brother to have his own building insurance, regardless of what the other two do?

    Is it possible to find out if there is insurance for any of the flats, and if so, who with? I ask this because if my brother is going to get his own insurance, he would want to be sure that his flat is not already insured.

    Thanks for reading, I hope I explained it clearly enough.

    #2
    It's building insurance, not flats insurance.
    The WHOLE building, the grounds, underground drains ( if included ) and ALL leaseholders pay towards the buildings insurance, but if you want contents insurance to cover thisng that you are responsible for in a flat ( Flat internal water pipes, boiler, electrical wire etc, then each flat takes out their own contents insurance.

    The designated persion in the management company deals with maintenence, buildings insurance etc, be it one of the directors living there or an outsourced managing "agent".

    You write to the "Company" and ask again, and adding that if there in no bildinga insurance, , can you have it in writing "From the Company" that THEY promise to rebuild etc etc ( such as fire burns it down ).
    Also add that your mortgage company will not be pleased to hear that there is no buildings insurance, and that their "asset / insurance against loss of property" if not insured, would probably have the mortgage agreement cancelled, and you have to pay hundreds of thousands of pounds to clear your mortgage debt.

    You are entitled, by law to get a copy of the buildings insuance info - in it's entirety, so ask THE COMPANY for a copy as well --- send your letter to the Contact address of the company secretary AND the other two flats.

    Comment


      #3
      As RAM says - you cannot self-insure a flat (well you probably can but you would probably have to insure the whole building yourself with some super-expensive bespoke policy).

      Your starting point is understanding who or what owns the freehold, what the leases say, and what the Articles/memorandum of the Company to which you refer says about how the company works. You have reading to do.

      Comment


        #4
        All 3 of them are owners. There is no mortgage.

        So if I understand correctly, he has the legal right to know if there is insurance, and if so, who with?

        The problem is, the registered address of the management company is the same PO Box address for Mr C. And Mr C isn't picking up the phone when my brother calls him. He's tried several times. I can't be sure but I think something fishy is going on.

        Not to mention the fact that if there is insurance, then the decision was made without my brother's input.

        I'm starting to think that this is a matter of nothing more than sheer incompetence.

        Comment


          #5
          Originally posted by Keith Mooney View Post
          I don't know the terminology but it was sent so that both could see it (CC or BCC?).
          That's CC. BCC is blind.
          There is a fine line between irony and stupidity. If I say something absurd please assume that I am being facetious.

          Comment


            #6
            Originally posted by Keith Mooney View Post
            All 3 of them are owners.
            That's unlikely to be correct - the company you mention is likely the owner.

            As I said your starting point is understanding the situation.

            Comment


              #7
              Originally posted by AndrewDod View Post

              That's unlikely to be correct - the company you mention is likely the owner.

              As I said your starting point is understanding the situation.
              My brother outright owns his flat. The other two directors also outright own theirs. The flats are all share of freehold and each owner is a director of the management company.

              Comment


                #8
                Originally posted by Keith Mooney View Post

                My brother outright owns his flat. The other two directors also outright own theirs. The flats are all share of freehold and each owner is a director of the management company.
                You cannot (or usually cannot) own a flat outright. So no he does not. What you own is a contract (basically a tenancy agreement). The Company owns all the flats. Being a Director of a Company does not mean you own that company. Being a shareholder means you own a part of the entity with whom your contracted to create that tenancy agreement.

                These may seem like minor distinctions, but they are critical to understand and to progress any problems.

                Comment


                  #9
                  To -- Keith Mooney

                  Before you ask any more questions, then tonight. read the leasehold info at below First link.

                  https://forums.landlordzone.co.uk/fo...ead-in!-part-1

                  And you 3, as directors have to abide by the "law" of the companies act 2006 section 46
                  see sctions 170 to 180.
                  This can be found at my -limited- info site at
                  http://ram2.hostbyet2.com/ companiesAct2006.pdf

                  You 3 directors also have to abide by the R.I.C.S. Code of practice.
                  http://ram2.hostbyet2.com/ Rics_code issue 3.pdf

                  You call directors meetings, shareholder meetings.
                  If you don't give Companies house your yearly accounts, and you ignor the second request from them, you will, as a dirctor be fined up to £ 5000 - each director, the company stuck off, and you cant sell your flat.

                  PLEASE don't take this post as demeaning, as most of us on here were at a stage where you are now.
                  Above is to help you understand.


                  Hope you are not too confused after reading some of above links.

                  Comment


                    #10
                    Ram, I do appreciate your help and I certainly will read what you've linked to. But I have to say, my brother does own his property. It's not leasehold, it's share of freehold. There is no company involved other than the management company that was formed in the name of the building (as in : "69 Acacia Avenue Management Company ltd" - which would encompass flats A, B and C). They don't pay service charge to anyone.

                    Or maybe I'm missing something, I guess you'd know more than me, but I'm sure there's a huge difference between leasehold and share of freehold. Does share of freehold not mean that all 3 of them together own the freehold?

                    I promise not to say another word until I've read what you've linked to.

                    Comment


                      #11
                      Let's us start from the point that your brother have two hats: a shareholder of the company owning freehold and leaseholder.

                      ​​​​​​Once there is an understanding you could move on.

                      Comment


                        #12
                        If you have no lease, then you have not contracted to pay ANY service charges or insurance, nor for anyone to keep the total property estate maintained and in good order.
                        There MUST be a lease or at least a contract to pay service charges -- yes, a contract. No contract = the place falls down around you as there is no legal way of maintaing the property.

                        Comment


                          #13
                          Originally posted by Keith Mooney View Post
                          Ram, I do appreciate your help and I certainly will read what you've linked to. But I have to say, my brother does own his property. It's not leasehold, it's share of freehold.
                          You don't understand how it works. I have to say.

                          Comment


                            #14
                            Ok, Ram you're right. I think a lot of people would probably make the same mistake as me, which is to assume that freehold means owner. So whenever I hear someone saying that they bought their house freehold and that therefore they own it and the land that it sits on outright, I guess that's not correct.

                            Anyway after reading your links and doing a bit of research, here's my understanding (let me know if it's correct) :



                            The landlord owns the land outright, and also owns the building outright.

                            Anyone who buys the building leasehold, is treated as though they own the building for a period of time (i.e. 99 years). They don't own it outright, but for all intents and purposes they are regarded as though they own it. However they do not own the land in any sense, and pay the freeholder (whoever that may be), or even the landlord himself, for the use of the land.

                            Anyone who buys the building freehold, they are regarded as though they own it for a certain time (i.e. 999 years), and they are also regarded as though they own the land too. I don't know if they pay the landlord anything, I didn't look into that.

                            The rights of the landlord, even though they own the land and building, are compromised to an extent to accommodate the rights of the leaseholder. Likewise vice versa.

                            Share of freehold is when a number of people either :

                            - Each personally own a share of the freehold
                            - Each own a share of a management company that is the freeholder

                            This means that each person is treated as though they own a share of the building and a share of the land (all the while it's the landlord who really truly owns it all, but whose rights are compromised to an extent to accommodate the "owners").

                            So what that means is that my brother, in this case, is a 1/3 owner of a management company that is the freeholder of that building and land.

                            Renting means borrowing and leasing means being treated like an owner (to an extent, and for a period of time).



                            Is that accurate?

                            Comment


                              #15
                              Look at it this way .
                              A House is built.
                              The house is owned initially by the occupant, lets say it's one man and is freehold ( no flats conversion yet )
                              The house owner converts it into flats, and still owns the freehold.
                              The house owner eventually sells his flat, but has to assign the freehold to someone / something.
                              House owner forms a company. The Company owns the freehold.
                              The leaseholders of the flats can then become a shareholder in the company that owns the freehold, if they wish.
                              Not everyone wants to become a shareholder in the house flats. But most do.

                              The freehold is owned by the Directors, as it's the Directors that get sued if they don't obey the lease, or fail to put accounts in on time to Companies House. The shareholders are not sued.( except if they are a Director )

                              While I remember, send emails to each other, but on important matters send a letter as well ( you stick it through the letterbox for that flat )

                              The leaseholders do not own the building. The freeholder does. The freeholder is a Company, with designated Directors.

                              How many directors are there ? - look on Companies house and type in the name or reg. Number ( most start with a zero )
                              go to https://find-and-update.company-info...ervice.gov.uk/
                              You may find there is a Company Secretary as well.

                              The leaseholders ( please tell us there is a lease ) buy the right ( via a lease ) to occupy the flat for a set period, and the areas you are leaseing is described in the lease as "Demised to you" Be it 99 years, 125 years or 999 years, and at the end of the lease ( just like a leased car ) you give the flat back to the freeholder and get no payment for it, cos it was leased, not bought ( just like a leased car ).

                              The freeholder grants the leaseholder rights to use HIS grounds ( called common parts )- such as to pass and repass over the drive way, ( which means you have permision to walk accros the freeholders property, If those and other rights are not in the lease - your flat becomes land locked ( you can't pass over the drive to reach your flat ) as well as permision from the freeholder to pass over the garden, access the basement.

                              Yes, in effect shareholders are "sort of" in control of the building and grounds but the lease is the important thing that must be enforced, and you cant change any leases unless they are "Defective" or an e.g. authorised grond foor extention is built, when a deed of variation is attacthed to the lease stating that an addition to the demised parts has been added.

                              A leasholder has a share in the company that owns the freehold. The leaseholder does not own any freeholding, the Company does.

                              Bus as in your brothers 3 flats, it can be "assumed" that all 3 will make decisions about the property. as there are only 3 of them
                              Unlike a block of 20 flats where there may only be 4 directors, the directors make ALL the decisions, as you will never get anything done if there are 20 flats and 20 directors,

                              Directors have a habit of acting in their own interests- and dam the lease and the law, such as is happening with your brother.

                              Again, is there a lease ( find one ) ?
                              How many directors are there ?

                              Then go back and attempt to do what is shown in the above posts.

                              Hope i have not missed anything, and although you may not like some of my definitions, but definitions they are, in order not to stray too far.

                              As I said -- we have all been in your possition, we have initially got it wrong, including me and parents, 25 years ago.

                              But please keep coming back here, as I / we wished this site was available, or know about 25 years ago.





                              .

                              Comment

                              Latest Activity

                              Collapse

                              Working...
                              X