Q: I am buying a flat with “a share of freehold”. There are six leaseholders who have set up a company to own the freehold. Will I own a freehold flat?
The answer is no – you will not own a freehold flat. You buy the flat subject to the lease, which will contain obligations the leaseholder and the landlord owe to each other and these will remain.
For example, the landlord will usually be obliged to repair, manage and insure the building and the leaseholder will be required to contribute towards the landlord’s costs for looking after the building. The lease will contain certain restrictions relating to pets, alterations or flooring, for example, which the leaseholder is obliged to comply with.
Essentially, a building which contains flats, is owned by the freeholder. In your case, you are receiving a share in the company (set up by the leaseholders), which owns the building. A share of freehold should let you carry out the landlord’s duties under the terms of the leases, be in control of the building and better monitor expenditure than say a third party landlord, which is the general appeal of buying a flat with a share of freehold. However, there are other issues to consider too.
Neighbours who are members of the company can make decision-making difficult, if they are uncooperative or unresponsive . To better understand your say in the company or what the share entitles you to, your solicitor should check how decisions are made on behalf of the company and who is entitled to be a director.
If a director fails to meet his/her responsibilities, they can be fined or prosecuted. The failure to run the company properly can mean the company is struck off and the leaseholders no longer own the freehold interest.
The company owning the freehold should be careful if it is considering waiving any of the provisions of the leases. For example, unreasonably delaying major works may devalue the building, giving rise to claims against the company.
Your solicitor should check there is paperwork to support the company is observing the terms of the lease or that there are qualified managing agents instructed by the company to manage the building. Your solicitor should check the current length of the lease, too, as there is no guarantee you will receive an extended lease or can grant yourself a new extended lease.
Bircham Dyson Bell is a multi-disciplinary UK law firm advising private companies, public sector bodies, not-for-profit organisations and individuals since 1834. Visit bdb-law.co.uk to find out more
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