Leasehold with share of freehold- what does it mean?

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  • Leasehold with share of freehold- what does it mean?

    I am going through the process of buying a Maisonette with share of freehold. Its effectively a Maisonette (ground) and someone else has the upstairs

    I've been given a whole wad of papers by my fairly unheldful solicitor

    This includes

    1. A leasehold document... This was set out in 1970 on 99 years and has 67 years to run. There is a £20 annual rent and insurance
    Solictor stated that it was fairly academic and that to have a share of freehold you needed (for legal simplicity) to have a leasehold contract as well - that I'm stumped by

    Why do I need to have a leasehold contract?

    When the property was split into maisonettes the 2 property sections freehold was granted to the upstairs and downstairs but the people doing this retained a leasehold interest...........?

    The leasehold register is split into:

    Property register (a) - the people named are the ones who started the lease in 1970, not the current owners
    Proprietorship register (b) on title absolute is the person/peoplle who currently own the property

    My solicitor tells me its all academic and that I own the leasehold and the freehold. The £20 will never be paid and that the person named from 1970 is simply historical and that I can extend the leasehold to 999 years but theres no point as it doesnt mean anything and it'll cost me about £500 in costs and land registry stuff

    The upstairs has the same lease agreement

    Theres a tonne of restrictive covenants but these seem to come from when the 1st purchase was done back 100 years ago

    2. Then theres the freehold

    This contains the following restriction in the title absolute which I dont understand

    ''No disposition by a sole proprietor of the registered estate (except a Trust coporation) under which capital money arises is to be registered unless authoirsed by an order of the court''

    The charges register states as a last point

    ''The parts of the land affected thereby are subject to the lease set out in the schedules of leases hereto. The leases grant and reserve easements as therein mentioned'' - goobledigook

    This also contains a tonne of restrictive covenants

    3. Then theres some info on the lease clauses taken out in 1970. This effectively states that a fair share of costs be imposed. So if the roof needs repairing then I would have to share the cost..... seems a bit odd as the loft area has been converted.........

    I guess I'm after some comfort that having a lease with SOF is normal and that I am the actual owner of the property and the land (50% at least anyway)

    Is the leasehold taken out to cement the covenants of the SOF - is this the only way it can be done?

  • #2
    1. You are buying a LEASEHOLD. The register entries sound correct.
    2. The FREEHOLD REVERSION, i.e. the freehold estate subject to both leases, might be in joint names of the two flats' leaseholders (i.e. your vendor + other flat)- see Proprietorship Register of freehold title- or in someone else's name [unlikely]. In the former case, the f/r wil be transferred so that your 50% share is reflected in the same way as your vendor's is.
    The restriction simply means that, if one of f/r owners dies, his/her share does not pass to other one but, instead, into Deceased's estate- distributed under Will or on intestacy.
    3. Service charge provisions demand that all maintenance/repair/insurance of structure is paid as to 50% by each flat.

    Leasehold is one of the only two acceptable ways to divide a building horizontally. The only other way is called Commonhold.
    Please contact me direct (see TOPIC EXPERTS page) if you need to know more.
    Last edited by jeffrey; 09-08-2007, 11:00 AM.
    JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
    1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
    2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
    3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
    4. *- Contact info: click on my name (blue-highlight link).

    Comment


    • #3
      I've been given a whole wad of papers by my fairly unheldful solicitor
      I am sad that you haven't had it all explained to you properly. I think you are entitled to go back and ask for proper explanation such as Jeffrey has given.

      This is part of the problem that people have when buying - they don't know how much stuff will be explained to them - and when buying for the first time don't know the kind of stuff that will need to be explained. Some solicitors cut corners by not really trying to explain this kind of thing at all. I don't know whether you had a factory conveyancer of a high street one but you really shouldn't be afraid to come back and ask more.

      When I get people not understanding my explanations of stuff I regard it as a challenge to improve them so they do understand!

      As a conveyancing solicitor I believe the information given in the post to be useful but I accept no liability except to fee-paying clients
      RICHARD WEBSTER

      As a conveyancing solicitor I believe the information given in the post to be useful (provided it relates to property in England & Wales) but I accept no liability except to fee-paying clients.

      Comment


      • #4
        Buying leasehold flat- delays due to share of freehold

        Hi, I am hoping for some advice.
        I have been trying to buy a ground floor flat for MONTHS now, its been a nightmare. The flat has a share of freehold with the upstairs flat owning the other half of the freehold. The problem has been that the joint freeholder has enlisted the services of a very difficult licenced conveyancer (he isnt even a solicitor). I am hoping to do some works to the ground floor flat (if it ever goes through). The joint freeholders solicitor has issued a "Licence To Alter". We are refusing to agree to this. In this Licence to Alter, his client (the joint freeholder) is called "The Landlord" and the guy I am trying to buy from is called "The Tennant". Its wrong, they both jointly own the freehold. Apart from that, I have found out that this licence is really only for commercial premises, not residential flats. Is that correct? Despite the vendors solicitor sending this Licence back to the joint freeholders solicitor and telling him that it was inappropriate, he is insisting on going down this route. Its not as if I am planning on doing any major structural works. I am moving the kitchen and bathroom, some plumbing, re-wiring, decorating. I am hoping to move one doorway though, that is vaguely structural I suppose (its on a main suporting wall). I have told the joint freeholder that the building regulations surveyor from the local council will be checking out the works, but she is insisting on her own surveyor coming and checking everything (at my expense). Can she do this? Can her solicitor be so bullying and force his Licence to Alter on everyone like this?
        How can we proceed if the joint freeholders solicitor is going to be so difficult?
        Any help would be appreciated. Surely its fairly commonplace for someone to buy a flat in need of modernisation and not to have to endure these difficulties from a fellow joint freeholder? Can a joint freeholder be so difficult that it can obstruct a sale?
        Thanks,
        Chris

        Comment


        • #5
          Basically, if you going to have that level of hassle, don't proceed with the purchase. You are just going to have more trouble in the future and going in to the legal rights and wrongs is all very well, but it will cost a lot of money to go to court if you have further problems with the joint freeholder in the future.

          This would be akin to a neighbour dispute and these generate tremendous amounts of heat and no light and cost a lot of money.

          You do not have to buy the property. Walk away now...
          RICHARD WEBSTER

          As a conveyancing solicitor I believe the information given in the post to be useful (provided it relates to property in England & Wales) but I accept no liability except to fee-paying clients.

          Comment


          • #6
            what percentage of freehold share per person?

            We have 3 flats in my building and we are all interested in purchasing the freehold. One flat occupies the top two floors, the other flat the ground floor and the third flat the basement - so basically the floor space (and service charge) is split 50%, 25%, 25%.

            In terms of our individual costs towards the freehold purchase - I imagine this would be along the lines of what each of our individual long lease extensions would be (plus 1% or so extra for the freehold) - so the cost for the freehold would not be in the 50/25/25 proportion (also as we have different lease lengths that would not make sense).

            However, what would be the split of ownership of the freehold - would it be 1 equal share (ie 33% each) - or would it be the 50/25/25% split - or something else?

            Comment


            • #7
              1. Contributions to f/r purchase price are not governed by anything in leases, so the contributors have to agree how much each.

              2. Really, the best way would be to consult a surveyor for fully-detailed breakdown of value of each flat:
              a. at present, given the unexpired term for that flat individualy; and
              b. in future, immediately the lease's term is increased to - say - 999 years.

              3. Item b minus item a shows the total gain for the flat concerned. Add the three gains together (=T), then calculate % of T for each flat.

              4. Apply each flat's % of T to total f/r price (inc. all fees- V's as well as the three Ps'. This will show how much each lessee ought fairly to pay.
              JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
              1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
              2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
              3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
              4. *- Contact info: click on my name (blue-highlight link).

              Comment


              • #8
                Originally posted by jeffrey View Post
                1. Contributions to f/r purchase price are not governed by anything in leases, so the contributors have to agree how much each.

                2. Really, the best way would be to consult a surveyor for fully-detailed breakdown of value of each flat:
                a. at present, given the unexpired term for that flat individualy; and
                b. in future, immediately the lease's term is increased to - say - 999 years.

                3. Item b minus item a shows the total gain for the flat concerned. Add the three gains together (=T), then calculate % of T for each flat.

                4. Apply each flat's % of T to total f/r price (inc. all fees- V's as well as the three Ps'. This will show how much each lessee ought fairly to pay.
                thanks for that - i'm getting the surveyor in next week to perform the valuation, but that's a good indication of what to expect.

                what about the actual share of freehold ownership though - should it be equal ownership per flat (ie 1 share each in the freehold company) or should it be per % floor space (ie 2 shares for larger flat and 1 share each for the other two) .
                It can't be based on the same % that is used to calculate the share of cost because one flat has a 86 year lease (hence much smaller contribution to cost) - the other flats which have 72 year leases (so larger contribution to cost)

                Comment


                • #9
                  Originally posted by cmcbugg View Post
                  What about the actual share of freehold ownership though - should it be equal ownership per flat (ie 1 share each in the freehold company) or should it be per % floor space (ie 2 shares for larger flat and 1 share each for the other two) .
                  It can't be based on the same % that is used to calculate the share of cost because one flat has a 86 year lease (hence much smaller contribution to cost) - the other flats which have 72 year leases (so larger contribution to cost)
                  Once the lessees have paid up the cost of f/r, percentages are largely irrelevant. The f/r will have its value reduced to almost nil, by grant of the enhanced leases.

                  If the f/r is held by the three lessees (see below*), the new rules will prohibit a lessee from transferring a leasehold flat unless- at the same time- that lessee + the other two transfer the block's entire f/r to that lessee's successor + the other two.

                  I therefore suggest that all three should have equal 'shares', but remember that these are of no practical consequence or value.

                  * - It is unnecessary to use a limited co. for the purchase (as the f/r can be held in all three individuals' names) but, if a co. is used, it should be Limited by Guarantee rather than by shares.
                  JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
                  1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
                  2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
                  3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
                  4. *- Contact info: click on my name (blue-highlight link).

                  Comment


                  • #10
                    Originally posted by jeffrey View Post
                    It is unnecessary to use a limited co. for the purchase (as the f/r can be held in all three individuals' names) but, if a co. is used, it should be Limited by Guarantee rather than by shares.
                    Sorry to butt in, but could you elaborate on why the company should be 'Limited by Guarantee'?

                    Regards
                    I am not a solicitor, I am a lessee/shareholder in conflict with the management. Please seek your own legal advice before relying on my comments in this forum!

                    Comment


                    • #11
                      Originally posted by animal View Post
                      Sorry to butt in, but could you elaborate on why the company should be 'Limited by Guarantee'?
                      I just looked into this based on jeffrey's reply - and it appears that a company limited by guarantee is a different type of company mainly used for Not for Profits - and hence I imagine has lower administrative costs than a normal company - so probably more appropriate for a small freehold ownership

                      What is a Guarantee Company?

                      A company limited by guarantee is an alternative type of incorporation used primarily for non-profit organisations that require corporate status. A guarantee company does not have a share capital, but has members who are guarantors instead of shareholders. The guarantors give an undertaking to contribute a nominal amount towards the winding up of the company in the event of a shortfall upon cessation of business. It cannot distribute its profits to its members, and is therefore eligible to apply for charitable status if necessary.

                      Comment


                      • #12
                        Originally posted by animal View Post
                        Sorry to butt in, but could you elaborate on why the company should be 'Limited by Guarantee'?

                        Regards
                        There are two reasons- one legal and the other practical.
                        1. If the 2002 Act's amendments to the 1993 Act are ever implemented (no commencement date still), a new definition of "RTE [Right to Enfranchise] Company" will demand Limited by Guarantee, without the option.
                        2A. Limited by Guarantee = nominal £1 per member payable if Co. is ever wound-up. Minimal paperwork re membership, initially and subsequently.
                        2B. Limited by Shares necessitates:
                        a. initial Share Certificate to be issued;
                        b. (so there's another item capable of being lost by lessee!);
                        c. associated Stock Transfer Form palaver on every occasion that leasehold interest is transferred; and
                        d. new Share Certificate each time.
                        JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
                        1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
                        2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
                        3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
                        4. *- Contact info: click on my name (blue-highlight link).

                        Comment


                        • #13
                          Share of Freehold calculation

                          I have trawled various sites including lease-advice.org but cant find anything refering to my situation and therefore i hope some of the forum experts may be able to shed some light.
                          I own the leasehold to the upper flat in a victorian house conversion (there are only 2 flats). The freeholder has recently put forward the idea of selling me the freehold to my flat, ie. retaining himself the freehold of the downstairs flat so we own 50% of the freehold of the property each.
                          I have 123 years left of the leasehold, pay £400 pa ground rent and the flat is currently valued at £240,000.
                          The examples on the sites use multiplier values from tables i dont have, is there a way of calculating these mathematically? Or if anyone has the tables can they pass on the relevant multiplier values for the information i have given. Or even estimate the freehold cost.
                          Thankyou in advance.

                          Comment


                          • #14
                            To evaluate how much to pay I think you need to be clear as to what will happen to your ground rent going forward.

                            If the freehold owner of the ground floor flat has a ground rent reserved on his lease of £400 then I assume you will simply agree not to charge ground rent to one another. Hence you will have rid yourself of the obligation to pay a highish ground rent on a flat worth £240k. If that is the case the formula in is very simple in that it is a capilisation of the ground rent and this can be acieved (if the ground rent does not rise throughout the terms) as follows:-

                            Say capitilisation rate 7.5% = 0.075

                            £400 / 0.075 = £5,333

                            If the ground rent rises let me know and I will give you the capitilised value. Unless it rises more frequently than every 25 years I doubt it will make much difference as you will be some 23 years away from the next review.

                            In negotiating with the freeholder as he wishes to retain a 50% interest the market value of the other 50% would be considerably less than £5,000 if indeed he could find someone interested in it. As an investor in such things it holds no attraction to me whatsoever. This should help in your negotiations and I would start your offer in your case at around £3,700 (you do need to get rid of a £400 ground rent it is a problem (but not major)

                            Comment


                            • #15
                              Originally posted by DaveukRN View Post
                              I own the leasehold to the upper flat in a victorian house conversion (there are only 2 flats). The freeholder has recently put forward the idea of selling me the freehold to my flat, ie. retaining himself the freehold of the downstairs flat so we own 50% of the freehold of the property each...
                              I have 123 years left of the leasehold, pay £400 pa ground rent and the flat is currently valued at £240,000.
                              No- absolutely not ever. Do not even dream of splitting-up the freehold reversion; it must remain intact for the entire building.
                              Better to agree:
                              a. to transfer f/r (whole building) to joint names (= you + Mr X); and
                              b. on the same day, and immediately thereafter, to grant new lease of lower flat FROM you + Mr X TO Mr X alone.
                              JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
                              1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
                              2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
                              3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
                              4. *- Contact info: click on my name (blue-highlight link).

                              Comment

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