Share of freehold questions - confused

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    Share of freehold questions - confused

    Not sure if this is the right place for this query but anyway, I'm a first time buyer and have been searching for a property for like two years now (not continuously but on and off and obv covid halted my search for a while). I found a really nice 2 bedroom flat for under £320,000 in a block of around 12 flats (I think) and my offer has been accepted, however the only issue that is concerning me is that it is a "share of freehold." From what I've read, overall this is a better option than an ordinary leasehold option as it gives you more control and autonomy about how the building is run etc. and also it slightly increases the overall value of the property, you can increase the length of lease plus it's easier to sell the property?

    At the same time though I'm reading reports of people saying it can be good but only if the others involved play their part in the agreement. If they do not co-operate then this can cause issues?

    So what is the verdict here really? Is share of freehold worth going for or should I stick with a leasehold flat (as most flats are leasehold)??

    #2
    1. Leasehold title means each flat is held on a 99 years or 125 years long term rental contract and leaseholder paying annual ground rent. to the freeholder. When the lease terms ends , the flat must be handed back to the freeholder. Leaseholders have no ownership in the building.

    2. Freehold title means having legal ownership of the property ( including the building and communal areas up to the boundary fence . )

    3. A freehold title can be owned by a ground rent investment company ( which is not good situation for the leaseholders )

    4. or owned by the leaseholders ( means owning a "share of the freehold company " ) and this is a better situation for the leaseholders.

    "Leasehold title" plus a "share of the freehold title" is definitely the superior choice compared to choosing only a "leasehold title ".

    Comment


      #3
      I am a leaseholder myself on a couple of properties and I manage a couple of blocks. Getting 12 owners to agree on anything if work needs doing is always a challenge as there are always differing views. and there are often 'non payers' to the fund who have to be chased.
      Think about acting on some of the points below.

      1. Ask if the 'freeholder' uses a management company which all 12 will pay towards or do they manage themselves?
      2. What do the common areas look like? Are they well kept and cleaned?
      3. How much does this cost per annum and does the price increase a lot?
      4. How much is in the 'sinking fund' towards repairs.
      5. Knock on a couple of doors and ask tenants/owners if there are any issues with the management.
      6. Ask to see some copies of recent AGM minutes.





      Freedom at the point of zero............

      Comment


        #4
        Originally posted by sixunforced View Post
        At the same time though I'm reading reports of people saying it can be good but only if the others involved play their part in the agreement. If they do not co-operate then this can cause issues?
        This is a very difficult question. At the risk of sounding unpopular with the LLZ community, we prefer leasehold where there is a third party freeholder. We have found that if/when there were issues with how a third party freeholder was managing a development we had plenty of ways of addressing and remedying them via the application of leasehold law. Although all of those remedies are available in a shared freehold/RMC situation, we have found it much harder to tackle in these situations as we were essentially doing battle with our own neighbours/shared freeholders. Doing battle not only on leasehold law issues but also on company law issues.

        There is also the problem that in RMC/shared freehold situations, we have personally found huge reluctance among leaseholders to play an active part in the running of the development. In our experience, many leaseholders do not want to put in any effort at all but will jump all over the active members if/when something is done that they do not like or agree with.

        Whilst a shared freehold flat appears to be a better 'sell' than a leasehold flat with a third party freeholder, from our experience, we would choose the latter every time. If you are already sure that you want to buy this flat, I would advise you to ask questions about how the development is run, whether the shared freeholders use a RICS accredited managing agent and also what the Companies House listing for the freehold shows in terms of Officer take up ...

        Apologies in advance to anyone in the LLZ community that is offended by the above but I am speaking from our own personal (and sometimes painful) experience.

        Comment


          #5
          I own a share of freehold (1 of 3 flats) directly on the title deeds. I can tell you it is an absolute nightmare as all people think about is their own flat and pushing their own interests. (and of course when others constantly do this you revert to that type yourself). I had the vain hope of things changing with new owners, but it's actually got worse as they do not get the concept of shared freehold and almost treat things as if it is 3 freehold flats.

          I am getting out next year (if Brexit allows) and reverting to freehold from now on, and I'd advise you to do the same.

          Comment


            #6
            Thank you all for your comments and suggestions.
            I have looked into it a bit further, asked the vendor and found that it is indeed a block of 12 flats and each of them own a share of the freehold. Therefore, I will own 1/12th share of the freehold. They are all part of a Limited company formed back in 1999 to manage it with one person being the ‘chair’ who has been there since it was built. There is regular email contact between the 12 of them to discuss anything they need in relation to the building and management and everyone is really lovely, keen to look after the block and get involved.

            I guess as you've all alluded to it depends on how everyone co-operates together to run the building and maintain the process.

            Overall, I've been hearing that share of freehold is worth considering simply because the pros outweigh the cons, in that you have more control over the building you're in, the excess fees are less and you get to increase the lease for free to effectively creating more value on your property. I suppose as you mention Andy, that it all comes down to what the interests are of the other owners and that is hard to know for sure.

            Comment


              #7
              Sounds like nirvana. We have owned a flat identical situation to yours. As has been said, it depends on owners as, of course, the other depends on freeholder. Over 20 years it has varied hoever, on balance, I prefer share of freehold. I'm sure your new neighbours will welcome someone like you. Best Wishes.

              Comment


                #8
                I think a share in a company will be far preferable to owning directly on the deeds in a small block. Good luck.

                Comment


                  #9
                  • sixunforced, I write more to amuse you then to frighten you off share-of-freehold. I have lived in my nice little flat for 13 years. Both generations of director in all this time were pretty thoroughly hopeless/dim/delusional. But it is only two days ago that I discovered something that really made me drop my jaw: We have four directors for our 20-flat Victorian conversion of four terrace houses. They all complain that our Lease is 'too hard to read', and want to 'change' it. And they are directors for display reasons only, and to butter their egos.

                    The factotum is an estate agent who was imposed on our company by the first generation of directors. (This was odd, because the First Tier Tribunal has sole jurisdiction to impose a director on a leasehold company, but this court has no jurisdiction to impose a manager on a private residential company of shareholders.) The 'manager' appointed all four directors. And he decided that he is not a manager at all, but our company secretary, but, ahem! the sole decision maker in our company.

                    Suddenly, I became aware that the manager/company secretary has created a new bank account for us to pay our annual maintenance fee we into. And that account is held in the name of HIS private company. The literacy-challenged directors had agreed to this!

                    And my 13 years of share-of-freehold experience have not taught me what the heck I can do now. Perhaps Companies House will help. IF it does, it will be only to take exception to the fact that a Directors' Special Resolution has happened, but it was not sent to the Registrar, and the company members were not informed of it. And that will be interesting, for I bet that neither the directors nor their boss, the manager/secretary, know what a Directors' Special Resolution is.

                    Still, I have a registered title. So nothing drastic will happen to my interests. I am trying to inform the other shareholders. But I am the only one of the 20 who lives here full time. They will get my letter in a day or two, and perhaps some of them will read it. Tiddly-dum tiddly dum ...

                  Comment


                    #10
                    Originally posted by sixunforced View Post
                    Not sure if this is the right place for this query but anyway, I'm a first time buyer and have been searching for a property for like two years now (not continuously but on and off and obv covid halted my search for a while). I found a really nice 2 bedroom flat for under £320,000 in a block of around 12 flats (I think) and my offer has been accepted, however the only issue that is concerning me is that it is a "share of freehold." From what I've read, overall this is a better option than an ordinary leasehold option as it gives you more control and autonomy about how the building is run etc. and also it slightly increases the overall value of the property, you can increase the length of lease plus it's easier to sell the property?

                    At the same time though I'm reading reports of people saying it can be good but only if the others involved play their part in the agreement. If they do not co-operate then this can cause issues?

                    So what is the verdict here really? Is share of freehold worth going for or should I stick with a leasehold flat (as most flats are leasehold)??
                    Owning a share in the freehold company is definitely good for the leaseholders, because there is no annual ground rent to pay, and freehold company can reduce unfair payments under the lease and offer Nil premium cost for statutory 90 years lease extension.

                    Comment


                      #11
                      I generally prefer TP freeholder for some of the reasons alluded to above. Our freehold is subject of an enfranchisement claim and I dread the day the Nominee Purchaser (NP) takes over. We are not participating as we would not wish to even attempt to work with the members of the NP. The extent of breaches in their respective properties and service charge arrears staggering - yet these are the people the law allows to make future decisions regarding the block via enfranchisement. Part of the reason they wanted to engage in collective enfranchisement was they believe they will be able to avoid paying arrears and do anything they want in their respective flats and we worry how this will impact on us and our property.

                      Personally, we are mostly satisfied with our existing freeholder as is one of the other flats (also not participating in the enfranchisement claim). It is notable that the non-participants are those that abide by the terms of their leases and pay their service charges!

                      Comment


                        #12
                        As others have suggested, having a 'share of freehold' only means that you have more control over what happens to your property if all other leaseholders want to work together to maintain the building.

                        If you look through previous threads on this forum you will find numerous examples where a small group of leaseholders have taken control to the exclusion of everyone else, some leaseholders have refused to pay their share of costs, or leaseholders have breached their leases (and refuse to listen to anyone else in the block) because they think they can do what they like because they are freeholders.
                        In all these cases it can be difficult, and potentially expensive, to get the property managed properly.

                        Third party freeholders aren't necessarily much better, but(unless the freeholder lives in the block) it does mean that you are less likely to have fight against your neighbours if the building needs work done.

                        Comment


                          #13
                          I notice that many of you are using the word 'freeholder'. Under what conditions do share-of-freehold people have one? In my context, we are all members of our company that owns the freehold of our company's property. So there is no freeholder. All of us own an equal number of the company's shares. So collectively, we own the company. I had an idea that this is the situation of every share-of-freehold context. It will be funny if it turns out that I'm wrong. (I would know of the freeholder if we had one, would I not?)

                          Comment


                            #14
                            Yes, there is a freeholder - the company is the freeholder and you will each either be members (if the company was for example set up as a company limited by guarantee) with voting rights determined in the Articles; OR shareholders if the company was set up as a company with shares.

                            While people generally speak of owning a share of the freehold - they don't. You may find this interesting/helpful:
                            https://forums.landlordzone.co.uk/fo...ad-in!-part-1=

                            Comment


                              #15
                              Originally posted by EleanorDale View Post
                              I notice that many of you are using the word 'freeholder'. Under what conditions do share-of-freehold people have one? In my context, we are all members of our company that owns the freehold of our company's property. So there is no freeholder.
                              This illustrates one of the main problems with 'share of freehold' properties - many (perhaps most?) of the leaseholders who own flats in them don't understand that the normal leaseholder / freeholder relationship still applies.

                              The freehold company (which is what the leasehlders own a share of) plays the role of the freeholder and is responsible for upholding all of the parts of the lease that would otherwise be the responsibility of a third party freeholder.
                              For example, while some decisions can be taken by majority vote, and leaseholders may have more opportunity to sway decisions to agree with their opinions, The freehold company cannot agree to breaches of the lease terms because the majority vote for this.

                              There can also be problems if the freeholder needs money to defend against court/tribunal action started by a leaseholder, or if they need to start action themselves against a leaseholder who is breaching their lease - if the lease and/or company articles make no provision for such sums to be recovered this can be a problem.

                              Comment

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