Joint freehold & development

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    Joint freehold & development

    I hope this is an appropriate place to ask this. I have a question regarding developing part of my leasehold g/f flat and garages which is held on a joint freehold with the owners of one of the other two flats.

    When the freehold was purchased, it came with a double garage which I was going to purchase and the freehold on the entire property would be bought jointly with the owners of the first floor flat. Prior to completion, the other party approached me saying they would like some storage and could we make some arrangement regarding the double garage. As a neighbourly gesture, I offered to share the purchase of the garage but, as I planned to create a dwelling on the plot (comprising my existing single garage plus the newly bought double) later made several conditions:

    1) They would not stand in the way of such development
    2 In return, I would provide a more suitably dimensioned garage in the final development (a simple division would leave 2 long narrow spaces unsuitable for a vehicle)
    3) In recompense, they would receive £8,000 for any inconvenience

    OK, I was crazy to agree this and naively failed to take into account issues like splitting off the new property from the freehold but it's water under the bridge. Now, realising I stand to make a good profit on developing, they claim they are being ripped off, say the agreement is invalid and are treating their part of the garage as a 'ransom strip'. It seems they now value their share of the garage at around £60, 000! They claim the agreement is too old (maybe 10 years) and due to minor technicalities (signed by them at the time but only by me many months later with no dates) cannot be enforced. Understandably, I'm very unhappy about this and feel betrayed.

    Given this ransom situation, I'm unwilling to see them benefit from this ungentlemanly behaviour. What is my best way forward? Am I right in thinking that due to the freehold, they would have some rights on the new development? I'm guessing I'd need their approval to create a lease or split the freehold for the new development. As we have equal shares, if the remaining leaseholder joined the freehold, could his vote plus mine overrule them on this?

    I should add that the freehold has been assigned to a company for ease of admin/splitting freehold, in which we hold equal shares. There is no specific mention of the double garage in that agreement, although it is included within the edging of the plan held by the Land Registry. Legally, does this make it a communal amenity as it is not mentioned on anyone's lease?


      The first thing to do would be to take legal advice on the validity of the agreement that was entered into.

      With a lot of money at stake, it would be essential to know if that agreement can be ignored by one of the parties who originally signed it.

      The fact that the freehold is held by a company rather than two individuals may create a further problem, so good legal advice is essential before taking matters any further.

      It would not be sensible to start making any planning applications or paying for plans to be drawn up until the matter is sorted.

      Once you know what the current legal position is that is when you can decide how to proceed.

      At the moment you will be entitled to 50% of the profits realised from any development, but if you insist that you do not want to see them benefit from this ungentlemanly behaviour, then remember that 50% of something is worth a lot more than 100% of nothing.

      Negotiating to buy the other share in the freehold company before any planning permission is granted would be one way forward, but the value of the share will be difficult to decide on, because no planning permission had been granted.

      Agreeing to buy the share if planning permission was to be granted will undoubtedly increase the value of that share, but then the profits of any development will be 100% yours.

      Not knowing what area you live in, £60K for a building plot may be really cheap or really dear, but you need to decide what is best for you.

      A freehold held by a company can only be dealt with under the Memorandum and Articles of that company. If there is a 50/50 vote with one shareholder in favour and the other not, was there a mechanism in the M&A that allowed a decision to be reached.

      If that was never dealt with when the company was formed that may be the ultimate problem under the circumstances you have described in this post.
      Which takes us back to the problem "50% of something or 100% of nothing."
      "Cutting off your nose to spite your face" is also an old saying to take into consideration.


        Thank you for your reply. Surely, £60k is exhorbitant for half a small double garage in any event? As it is, my lease covers the garden and the adjoining single garage so it only has real value as a ransom strip.


          I feel pilman has it in a nutshell in his first sentence. With large sums at stake proper legal advice from someone who can read your agreement in full is going to trump advice on an anonymous internet forum in this rather complicated situation.


            Originally posted by andybenw View Post
            I feel pilman has it in a nutshell in his first sentence. With large sums at stake proper legal advice from someone who can read your agreement in full is going to trump advice on an anonymous internet forum in this rather complicated situation.
            Indeed, I was merely trying to get a feel for the situation before doing so. I feel it's always best to go into these situations armed with some information. At least, I'll know what questions to ask.


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