Splitting shares of Freehold in a building with a few peppercorn leases

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    Splitting shares of Freehold in a building with a few peppercorn leases

    Hello

    The leaseholders in my building are currently discussing the option of buying the freehold - the current freeholder is open to the idea.
    There are 3 complications:

    - A third of the flats are owned by a charity and have a peppercorn lease
    - There is also a commercial property with a peppercorn lease of 999 years
    - The remaining leasehold properties are 1, 2 and 3 bedroom apartments

    This opens all sorts of questions for us:

    A/ Am I right in thinking that if we the leaseholders buy out the freehold, we'll become responsible for the maintenance of all flats, including the ones owned by the charity and the commercial unit, though we won't be able to collect service charge from them?

    B/ Since all leasehold flats have almost identical length (+/- 5 years) and the ground rents are at most 10% different, I thought it be best to split the freehold equally among the leaseholders?

    Thanks!

    #2
    Why wouldn't you be able to collect service charges from the charities flats and the commercial property?

    The 'peppercorn' aspect of those leases will refer to ground rent. They will almost certainly have to contribute towards service charges (and if their leases do require no service charge contribution you are already paying for what would be 'their fair share' of any work that needs to be done.

    Before pursuing purchase of the freehold it would be worth getting copies of the leases for all properties to confirm what the freeholder's responsibilities are and what contribution each leaseholder should be paying towards service charges.

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      #3
      A I agree that you should inspect all the leases copies of which you can obtain from the Land Registry

      B You should have a meeting with the participants to reach an agreement and you should invite the charity and the commercial leaseholder to participate and the meeting,

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        #4
        I wouldn't touch this with your bargepole, too many conflicting interests, no wonder the freeholder is open to the idea

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          #5
          There are two aspects of the ownership of the freehold, the first is management and the second is income and capital rights

          Your company should be formed so that there is equal representation from all of those that pay towards the management. They would be given A share

          A second category of share capital should be issued to those that put up the funds to buy the freehold, so they receive the ground rent income and capital receipts from lease extensions. This second category of shareholders - say the B shares, they would have exclusive rights to decide on ground rent and lease extension premiums, they would have no extra rights on management issues

          This type of structure creates engagement from all parties but recognizes that those who put up the capital do get a return on their investment

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