Freeholder owns a number of leases, is this something to avoid?

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    Freeholder owns a number of leases, is this something to avoid?

    I am buying a flat in a block of 11 where the landlord is a small company with two directors. One happens to be the owner of the lease i would take possession of.

    The other does not own any of the leases directly, but some family members own at least 4 of them (maybe one or two more, i didn't check every title).

    My impression is that it gives the landlord even more control over the block than they would normally have. In the sense that if there are any disputes there are at least 4 leaseholders that are biased. Or worse, preferential treatment in payment of service charges is somehow given to the family members.

    The lease simply states that the service charge is divided equally and leaseholders have to pay whatever is demanded. And as far as i am aware all leases are on similar terms.

    Am I overthinking the potential problems and the lease will ensure that each lessee is treated the same (at lease as far as financial contributions go)? Or is this a situation to be avoided if possible?

    Many thanks.

    #2
    The Freeholder MUST abide by the lease and any leasehold ownership can be problematic. I doubt if you have to pay whatever is demanded. It would have to be expenditure justified by the lease and be reasonable.
    I suggest looking on the LEASE site where there is a wealth of information.

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      #3
      Hi Scot,

      Thanks for the reply. Yes i worded that badly, all i meant was the lease has a provision that states that all leaseholders are responsible for an equal share of a service charge and i have no reason to believe one lease is different from another.

      I did familiarize myself with the information on owning leasehold and understand the complications.

      My question was really, could a freeholder/landlord leverage the fact they have control over multiple leases to their advantage? I suppose the answer is yes, if what they do doesn't break the terms of the lease.

      I'm just not sure if really makes a difference? I suspect the landlord could make the same decisions whether they control other leases or not.

      I guess it's a bit of a hypothetical question, sorry.

      Comment


        #4
        All leaseholders should be treated equally and in accordance with the terms of the lease. Unfortunately this isn't always what happens.

        Hypothetically, you have the same protections where the freeholder is a company owned by leaseholders, and run by directors who have a controlling interest, as you would have if there was an external freeholder (you can take either to a tribunal to challenge costs).
        In reality the freeholder could find ways to fiddle the service charges in any circumstance where they own flats in a block - or even if they don't.

        You don't say whether the flat comes with a 'share of freehold' (i.e. all leaseholders are shareholders of the company, or equivalent), but if this is the case you may be less likely to be able to share control of the management of the building than might be the case if all flats were owned by unrelated leaseholders. However, even if the flats are owned independently, it is still sometimes the case that a group of leaseholders can exclude others from management decisions.

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          #5
          You need to be looking carefully at the service charge and how well the block is maintained. You could take the contrary view that they have a vested interest in maintaining the property and keeping costs reasonable.

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            #6
            I agree that you should have a very careful look at the condition of the building and what maintenance has taken place historically. The situation may be an advantage if the freeholder is intent on keeping the building in good condition due to the number of leases he/his family hold. Equally if all the leaseholds held are rented out and the freeholder doesn't give much of a fig about the building condition then the situation could be disadvantageous.

            If you are midblock I can see where there would be a disadvantage if there were noise above you in a freeholder owned lease. Or say you currently have bedrooms above your bedrooms and the freeholder granted permission for reconstruction placing a kitchen above a bedroom.

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              #7
              The property is not "share of freehold", so maybe that removes some possible complications.

              The building is maintained well enough, externally it is in good condition, internally it is not perfect, but really all that is needed is painting and some minor repairs. I think the more likely scenario is that the landlord/family have a vested interest in keeping it maintained right now. There are a number of flats let but the block is in a decent area and rents are above average.

              The service charge has been very variable over the last few years and has been going up. Some of the spend looks a bit high, but not excessive.

              There was a big spend last year for some external refurbishment (I'll watch out for any of that cost being rolled over into this year or next). It was actually pretty low in 17/18 though, 19 was high because of the refurbishment. This years budget is bang on average for a private block in the area of the country (according to Google).

              Thanks for the help, the responses have given me some extra things to consider.

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