selling a share of a freehold in auction

[propertyboy]

HI all,

Is it possible to sell a share of a freehold at auction? or on rightmove?

I am looking to buy a flat with a share of freehold. I want to keep the long lease but sell the share of the freehold.

The flat i am looking at is in a block of 6. The flat im looking at has recently had a new fresh 125 year lease. There are three flats with 45 years remaining on the lease to the freehold company.

Therefore there would be a bit of value i the 1/6th share of the freehold I would like to sell if i bought to free up capital.

[leaseholder64]

What do you mean by share of the freehold?

As far as I know, tenants in common cannot sell their part without consent from all the others. I think the Land Registry title is normally flagged to that effect.

If you mean shares in a company, the company constitution will typically tie share ownership to being a leaseholder.

[propertyboy]

Yep, thats what I mean.

If I own a share in the freehold, can I sell my share on auction BUT keep my long lease interest? Or can ground rents only be sold when the whole freehold company is for sale?

[AndrewDod]

If there is not something in the Company articles (which there usually is) to say that shareholders have to be owners of a lease, you can sell it in theory. But it sounds a very silly thing to do. The only likely purchasers will be your fellow lessees, and you will get a small amount of money in exchange for being screwed.

[ram]

No you cannot sell your "share".
You have a share in the "Company that owns the freehold".

Your lease will state ( and even if it does not ) that leaseholders will become a "Member" of the company, and that means the following.: -

There will be 6 shares issued, and only 6 shares.
Each leaseholder will have one share.
When a lease for a flat is sold, the Share certificate is returned to the freeholder ( it will have a number 1 to 6 )
The freeholder returns the price of the share to the seller, which is usually £ 1.
The buyer pays his £ 1 to the freeholder and gets a new share certificate, that has the same number on it, ( 1 to 6 ) but new leaseholders name on it

If you are able to ( very doubtful ) sell your share, the shareholder has a worthless piece of paper, as the "company" do not sell anything to the public or commercial firms, therefore does not make any profits, hence why the share is only worth £ 1.

So you sell your share ( not that you can ) to Mr. Smith across the road.
This means that you are NOT a member of the company, and cannot attend the yearly A.G.M's to vote on anything, but Mr. smith who pays no ground rent or service charges, can attend ALL meetings, and vote on maintenance and policies and you CANNOT, as you are not a shareholder.

This is why you cannot sell your share.
Also, the company would not allow one flat to have 2 shares, so cannot be sold to other leaseholders.
1 flat, 1 share, 1 vote.

Also, ground rents are not yours to sell either, Ground rents are the freeholders.

Suggest you stop trying to circumvent property laws, leases, and normal practices for your own get rich quick ideas ( Ideas that are totally wrong )

[propertyboy]

If I am looking in auction and the listing says the flat is sold with a share of the freehold, how can I proof it comes with the share of the freehold? Will the share certificate be included in the pack?

[propertyboy]

No you cannot sell your "share".
You have a share in the "Company that owns the freehold".



If you are able to ( very doubtful ) sell your share, the shareholder has a worthless piece of paper, as the "company" do not sell anything to the public or commercial firms, therefore does not make any profits, hence why the share is only worth £ 1.
)

Why would it be worthlesS? the new buyer would own 1/6th of a share in a company that receives cash flow via grount rents and reversion on three flats in under 56 years. This does not even factor in the potential hopevalue of marraige value extension. Please tell me why that is worthless? Assume the tenants don't extend, at the end of 56 years the company that owns the freehold gets reversion of three flats in London. So the owner of th 1/6th share benefits. Please explain what I am mising here?

[ram]

How can I proof it comes with the share of the freehold? Will the share certificate be included in the pack?

Read post number 5 and digest.

I was not going to answer, but maybe This Time you may "cotton on".

A company is made for the benefit of Leaseholders and not for Mr. Smith who does not live there. ( Post 5 ).. End of.
Only leaseholders should have shares.
Ground rent is to run the company.

O.K. Sell your share.
This is what may happen.
5 Leases are not extended, the leases revert back to the freeholder.
You get nothing as you are not a shareholder. You are then faced with a large service charge bill.
Mr smith gains - in your mind, thousands of pounds, for which if he was a leaseholder, he would put towards the next years /few years service charges ( if the was a leaseholder )
You wont get anything, as you are not a shareholder.

Very often, the freeholders put the lease extension money into the service charge account, to vastly reduce the next year or so.
The Directors of the company decide this, not you.
But as you wont be a share holder, only 5 flats will have money put against their account, and probably not have to pay for service charges that year, but YOU will have to.
So sell your share and tell the buyer that they May have to wait 45 years before people extend their lease, if they do at all, Your buyer will tell you to go forth and multiply, and also that the freeholder may cancel the share as Mr.Smith does not live there.

I repeat.
Suggest you stop trying to circumvent property laws, leases, and normal practices for your own get rich quick ideas ( Ideas that are totally wrong )

Goodbye.

[sgclacy]

If your share of freehold is by way of shares in a company then the answer is no

auctioneers are not regulated to sell shares . To sell shares they would need to be specifically regulated by the FCA and it’s not worth there while

[propertyboy]

Yeh i get nothing if i sell my share of the freehold but the person who buys my share pays me a premium to benefit from future cash flow


How else do you thinkg ground rents are valued? By your logic people would never pay to buy the ground rent or reversion as the ground rent and reversion is retained within the company - not logical

[propertyboy]

ram,

mrs smith would have to pay the premium to get her share , which is a pv of the future ground rent and reversion lol

So no I don't get nothing, incorrect statement. I would have been paid the premium, to sold my share.

And the premium would be MASSIVE, as it factors in that 3 leases are below marriage value..

[propertyboy]

ram,

If I buy a share of freehold and the other leases are on 40years, they would have to extend before selling as very unlikely a potential buyer will get finance on such a short lease, so there is MASSIVE inherent value in buyinng a share of freehold when my interest is much longer than the other leases. Fact that you are saying things like "You get nothing" in your hypotheticals makes me really question if you get it.

I can tell sglacy really gets it, but you keep saying things but it appears and I question your credibility - you seem like a walking textbook

[propertyboy]

sgclacy,

Thanks for your help. So I am looking to buy a share of freehold at auction now. The lease pack has the long leasehold interest and freehold interest online from the registers office. I can't see no share certificate, so how can i confirm it actually comes with the share of freehold? I think the vendor is telling porkys that it comes wiht a share of freehold. As there is too much inherent value in the current freehold given the short nature of the leases.

[leaseholder64]

"share of the freehold" is estate agent speak for a number of different arrangements. You really need to establish what it actually means in this case.

E.g my share of the freehold is implemented by membership of a limited by guarantee company, without shares. The company articles restrict membership to leaseholders and the lease requires a application for membership.

[propertyboy]

How is your membership documented/evidenced? Is it a certificate outlining you have membership in the freehold company?