Share of freehold, but no lease doc yet?

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    Share of freehold, but no lease doc yet?

    Hi guys,

    I've just viewed a flat today, which is one of 3 flats in a converted house. It is marketed as share of freehold. When I asked about the lease details, the estate agent told me that it hasn't been prepared yet, but there will be one, and there won't be any ground rent.

    The current freeholder of the entire house is a company with one director, who is also the developer. This company borrowed money from a bank to finish the purchase and the development work.

    The company currently still have outstanding charges (debt) to the bank. Now this company is selling one of the flats with a share of freehold, and renting out the other two through an estate agency.

    I was told that this company is also the management company for now, and if anyone buys the flat, the will have 33.3% share in the company. The buyer will also get a lease for this flat, but at the moment, it doesn't exist yet.

    All flats do have their own utility meters, but this flat doesn't have a proper postal address yet.

    Am I the only one that think they should have get more things ready before being allowed to put this flat on the market? Or is this actually quite normal?

    Also, I've checked this company director out. He's never been in court for anything, so that's wonderful. But he has had a stream of companies in the past (assuming for the business of flipping houses into flats), all dissolved apart from this current one. Some of the dissolved companies have outstanding charges (debt), and he never stayed with the same bank for the loans.

    I feel a bit concerned, but can't even put my finger on it. Does this make sense?

    Any advices, thoughts, suggestions are very welcome.


    You don't buy the property, you buy the lease - so knowing the details of the lease is essential.

    In this case you would also need to know more about how the "share of freehold" works.

    Most people will view leasehold properties before they have seen the lease, but only a fool would proceed with a purchase without seeing the lease.


      The form of lease probably has not been drawn up yet. There cannot be an actual lease because as yet there is no tenant. If you are going to be the first tenant that is not a bad thing as it means your conveyancer can negotiate the terms of the lease rather than you being in a take it or leave it situation.

      The developer cannot grant you a one-third interest in the freehold when you buy because that would mean you would get one-third of the rent of the other two flats and one-third of the sale proceeds when they are sold. However, one way or the other, your convenyancer can ensure that you will get the interest when the last flat is sold.


        Originally posted by Macromia View Post
        You don't buy the property, you buy the lease.
        In the strictest sense that is true because the freeholder does not "own" the property either, only an interest in it. A tenancy, however short, should not though be considered simply a contract to occupy property - it also confers an interest in land*. A landlord and a tenant both have an interest in the land leased. The landlord''s interest ("the reversion") amounts to the right to collect any rent reserved and to get back possession when the lease ends; the tenant's interest amounts to the right to possession.

        Getting technical, where a freeholder has granted a lease what the freeholder has is "an estate in fee simple absolute in possession" and what a tenant has is "a term of years absolute" - the only interests in land capable of existing as legal estates - see section 1(1) of the Law of Property Act 1925. The actual land and the buildings on it belong to the Crown.

        *Strictly, that is only the case where the landlord has an interest in the land.


          I'll state the obvious. Do not make any legal commitment until you are completely satisfied with everything.
          I would be cautious of someone who has had a stream of Companies.


            Thank you for all of your comments guys. We've decided not to go for it.


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