Enfranchising from a company I'm already a member of.

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    #31
    So, back to the question I was asking:

    "What would happen to the common grounds in this case?" In the event of splitting the freehold, what principles would apply to which 'new' entity would own those common parts?

    There are parking spaces (demised in the lease) for each of the 10 flats, but fortunately these are laid out in 2 contiguous blocks, which effectively adjoin the relevant buildings, so it seems obvious which chunks of those bits of land would go where.

    But what about the shared driveway from the road? And the boundary walls of the entire plot? Would it be a case of negotiating a split, or appointing a disinterested 3rd party to suggest an equitable split?

    Comment


      #32
      I suspect that you won't like this reply, Andrea, but I consider it worth posting anyway...

      Firstly, the 'enfranchisement' legislation does give leaseholders who wish to enfranchise the right to include "common parts" to which their leases grant usage rights within the enfranchisement. Who ends up 'owning' common parts depends very much on the specifics and realistically is not something that anyone on this forum will be able to answer without knowing precisely what your leases say, and how each side will argue their case when any enfranchisement hearing takes place.
      A mutually agreed split of an common areas would be possible, but I would suggest that it would be more typical for one party to retain/gain control of common areas with the leaseholders who don't have control remaining responsible for contributing whatever share of any future costs that their leases currently make them responsible for.

      Now for the bit you won't like...

      I think that eagle2 has raised some very valid points that are relevant, but which you don't seem to have given any consideration, let alone proper consideration.
      Firstly, enfranchisement comes with a cost. You would be 'forcibly buying' part of the freehold off of the existing company, which means paying 'compensation' to that company. Although only the leaseholders who take part in the enfranchisement would have to contribute towards the costs, all ten members/shareholders of the current company would likely be entitled to a share of the cost of 'buying' the freehold for your block (this assumes that the company articles would allow money received to be paid out - it might all be retained by the company and used for future company expenses). You would be paying at least something to the other block.

      Next there is the consideration of how costs are currently split, and what will happen in the future. You have said that all costs are currently split equally between all ten leaseholders, but what is the wording in the leases?
      If the leases state that each leaseholder has to pay one tenth of the total management costs for 'Block A' and 'Block B', there is no reason to assume that it will be any different if you enfranchise. You may still have to pay one tenth of the costs of maintaining the other block, but will have lost all control over what those costs are.
      No doubt you could potentially come to some sort of agreement to alter all of the leases as part of the enfranchisement process, so that the leaseholders in each block are made responsible for just their own block, but you will likely encounter resistance to this if it means that the leaseholders in the other block will end up likely to have to pay more - and it would be reasonable to say that the people seeking to enfranchise have to pay any costs for altering all leases as part of the enfranchisement costs if you were able to come to an agreement. As eagle2 has suggested, any leaseholders in the other block who realise that splitting the freehold will likely mean that their service charges increase will be well within their right to ask for some sort of compensatory payment before agreeing that the leases can be altered.

      I completely agree with eagle2 that you should resign as a director of the current freehold company. There are two reasons for this:
      1. As director you need to be considering what is in the best interests of ALL leaseholders. You are not doing this and are looking only at what you consider to be to your advantage.
      2. Realistically you should not be pursuing enfranchisement, and splitting the freehold, while you are a director of the current company - this is a clear conflict of interests.

      Seeking enfranchisement should be about gaining control of the management of your own building. You already have that.
      What you are seeking to do is not to gain control of management, but to personally benefit by effectively dumping part of the current property - that is most definitely what the 'spirit' of the enfranchisement laws intended.

      IMO, your refusal to even consider very valid points because they aren't what you want to hear, and the way that you have dismissed eagle2's posts out of hand, is extremely blinkered and not at all how anyone should use forums like this one.

      Comment


        #33
        A further very valid point from eagle2 that I forgot to mention in the above post...

        What did you intend to happen to the shares that leaseholders in your block have of the existing company?
        Were you intending to keep them and thereby retain some control over their block?
        Would you expect the leaseholders in the other block to buy the share off you, and if so at what price (perhaps you were thinking you could hand them over instead of paying anything for the enfranchisement)?

        You really do need to think this whole think through properly and then call a meeting of all shareholders to discuss the issue (a meeting at which, or before which, you should resign as a director).

        Comment


          #34
          Originally posted by Macromia View Post
          A further very valid point from eagle2 that I forgot to mention in the above post...

          What did you intend to happen to the shares that leaseholders in your block have of the existing company?
          Were you intending to keep them and thereby retain some control over their block?
          It's a company limited by guarantee - there are no shares or shareholders, only members. To be a member you have to have a leasehold interest in part of the property the company owns. If the company no longer owns the freehold of the property I'm a leaseholder of, then I can't be a member of the company.

          This isn't some silly plot to try to do some other people over.


          Comment


            #35
            Originally posted by Andrea Cunningham View Post

            This isn't some silly plot to try to do some other people over.
            That may not be your intention, but it definitely seems like you haven't given proper consideration to what enfranchisement would involve.

            What do the leases specifically say about what is included within service charge/maintenance costs and how service charge costs are to be split?
            Have you considered how whatever it says would apply if the freehold was split?

            Comment


              #36
              Originally posted by Andrea Cunningham View Post

              It's a company limited by guarantee - there are no shares or shareholders, only members. To be a member you have to have a leasehold interest in part of the property the company owns. If the company no longer owns the freehold of the property I'm a leaseholder of, then I can't be a member of the company.
              That potentially raises an interesting question about what happens to any money that needs to be paid for the enfranchisement.
              At the moment payment is handed over, all those in the block being enfranchised would presumably cease to be members of the company - so wouldn't be entitled to any share of the money even if it can be shared out between members.

              Comment


                #37
                Originally posted by Macromia View Post

                That potentially raises an interesting question about what happens to any money that needs to be paid for the enfranchisement.
                At the moment payment is handed over, all those in the block being enfranchised would presumably cease to be members of the company - so wouldn't be entitled to any share of the money even if it can be shared out between members.
                There is already no ground rent collected - so as I understand it the value of the freehold might be quite low anyway.

                If this is all done by negotiation then it is a moot point regardless, and it brings me back to what I was actually asking about, which is how to fairly and equitably split or in other way deal with common parts.

                Comment


                  #38
                  Originally posted by Macromia View Post
                  What you are seeking to do is not to gain control of management, but to personally benefit by effectively dumping part of the current property - that is most definitely what the 'spirit' of the enfranchisement laws intended.
                  As I said right at the beginning, there are some very sound reasons to do this which I wasn't going to go into. Suffice it to say that the current situation is one where the building I live in suffers under the tyranny of the majority of the larger building. So what is being sought is genuine control of our own, which is something that we do not currently have. If everything was going swimmingly, then why would we consider this move?

                  The 'personal benefit' is autonomy, and not being dictated to by others who have no interest in keeping the building I live in well maintained.




                  Comment


                    #39
                    Some managing agents calculate separate maintenance charge for each building ( B1 or B2) plus common charge ( C) for the external communal areas shared by all flats. So a leaseholder would pay service charge for B1 + C or B2 + C depending on which building has the flat. Would this arrangement suit your needs ?

                    Comment


                      #40
                      Originally posted by Andrea Cunningham View Post
                      As I said right at the beginning, there are some very sound reasons to do this which I wasn't going to go into.
                      For something like this, the reasons are of vital importance.
                      Anyone can, of course, choose not to reveal details, but anyone making that choice should not complain at all if other forum users respond with answers that the person who isn't being completely open considers not to be relevant.

                      Originally posted by Andrea Cunningham View Post
                      Suffice it to say that the current situation is one where the building I live in suffers under the tyranny of the majority of the larger building. So what is being sought is genuine control of our own, which is something that we do not currently have. If everything was going swimmingly, then why would we consider this move?

                      The 'personal benefit' is autonomy, and not being dictated to by others who have no interest in keeping the building I live in well maintained.
                      That just makes it sound even more like the best way to address the problems that you think need addressing might best be addressed in another way.
                      What you are saying here also gives a very different impression about your reasons than what you have previously said, which was more along the lines of not wanting to pay for repairs to the other block.




                      Originally posted by Andrea Cunningham View Post
                      There is already no ground rent collected - so as I understand it the value of the freehold might be quite low anyway.

                      If this is all done by negotiation then it is a moot point regardless, and it brings me back to what I was actually asking about, which is how to fairly and equitably split or in other way deal with common parts.
                      The value of the freehold may be low, but that doesn't mean that it isn't a consideration.

                      As for everything being done "fairly and equitably" "by negotiation", if you really thought that this was likely to realistically happen, why is it that you can't reach fair and equitable agreement on how the property is managed as a whole (especially if the leases are clear about maintenance requirements).




                      Originally posted by Gordon999 View Post
                      Some managing agents calculate separate maintenance charge for each building ( B1 or B2) plus common charge ( C) for the external communal areas shared by all flats. So a leaseholder would pay service charge for B1 + C or B2 + C depending on which building has the flat. Would this arrangement suit your needs ?
                      Managing Agents should only calculate the maintenance contributions for two different blocks separately, and charge the leaseholders based on which block they are, if this is how the leases say that service charge contributions should be calculated.

                      Andrea has not clarified what the leases for the property say about service charges, but from what has been said all costs are shared equally between 10 leaseholders regardless of which block is involved.
                      This would not change as a result of enfranchisement. If the intention is to change how service charge costs are split from what the leases currently say, there will need to be an agreement to vary the leases.
                      If an agreement to vary the leases so that leaseholders only pay a share of costs for their block (plus a one tenth share of costs for communal areas shared by both blocks), there would likely to be no reason to split the freehold as leaseholders in each block would rarely challenge proposals for work on the other block. The common articles could even be changed at the same time as the leases to give leaseholders more autonomy over what happens regarding their own block.

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