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freehold purchase

control of your

Take block Thinking of buying your

freehold? YashminmistrY cuts throughthe jargon andoffers some advice to flat owners

most butnot allcases –see below) andappoint their own. It enables leaseholders to get rid of unreasonable freeholdersand at thesametime offersthe possibility of reducing excessive servicecharges andinsurance premiums.It isaway to ensure valueformoney as well as protecting your investment.

* Whatdoes ‘share of

freehold’mean? Flatswithinabuilding areheldonaleasehold basis. Once the freehold has been purchased, although theindividual flats arestill held on leases,the freehold is usuallyheldby acompany inwhichall leaseholderswho participated in thepurchasearemembers. It is then possible to grantthe participating flat owners 999 year leases. Each leaseholder will have ashare issuedinthe companyifthe companyislimited by shares,oramembership certificate if it is limitedbyguarantee.Aflat marketedwitha“shareoffreehold” generally means youwould be buying aleaseholdflat plusashare in thecompanywhichownsthe freehold. If allthe leaseholders do notjoininthe

purchase, thosewho do will have to cover thecost of theflatsofthosewhodonot. Sometimesoutside investorscan be introduced to do thatwherenecessary.Itfollows that if aleaseholderdoesnot join in thepurchaseof thefreeholdtheywillnot have ashare in the companybuyingthe freehold.Ifsuchaperson later buys an extension to their lease they will notautomatically getashare in thefreehold unless they negotiate to pay extra for it.


acquiringthe freehold of a blockofflatsgives leaseholders the ability to take fullcontrol,remove incompetentmanaging agents (in


freehold could add valueto your flat

Whatare the benefits ofoWningaflatWitha

share of freehold? Themain advantages in owning a share of freehold are: n the leases can be extended to 999 years at a peppercorn rent (ie nil); n as the freehold is collectively owned by the leaseholders of theblock,any changes to the termsofthe leases that arecausing problems (for example, pets or wooden flooring) can be variedsolongasthemajority of shareholders in the freehold company agree; n theleaseholders have farmorecontrol over theday-to-daymanagementoftheir building andtherefore agreater ability to govern thelevel of servicecharges andinsurance premiums levied; and n the saleability of a flat with a share of freehold is generallyincreased.Often,a property is an individual’smost valuable asset and securing a share of freehold will protect it.

are thereany

disadvantages? It is advisable to engage the services of a professionalmanaging agentwho will undertakethe day-to-daymanagement of the block. Itmay be more expensive but could avoid neighbours fallingout overmanagement issues.

tripartite leasesand freeholdpurchasein practice

Many leases have,inadditiontothe landlord andthe leaseholder,amanagementcompany as athird party. This wouldbeknownas a ‘tripartitelease’. Theroleofthemanagement

company is tomanage the block. The purchase of thefreeholdwillnot affectthat. If the management companyiscontrolledbythe leaseholders nothingmoreneedstobedone as you have control of themanagement of the blockthrough that company. If,however,itis controlled by anyone else, you will need to take stepstosecurecontrol of themanagement of theblock byaRight toManage,asthe purchase of the freehold alone does not do this.

righttomanage –isthis analternative tobuying the freehold?

If themanagementofthe blockisthe only issue forleaseholders,itispossible to exercise theright to assumethemanagementby means of an RTMapplication.Thisdoes notaffect thelease termsbut givesthe lesseescontrol ofmanagement of theblock. SometimesRTMmayserve as aprecursor to acquiringthe freehold.(FormoreonRTMgo to the flat living website atwww.flat-living. and look out for our at-a-glance guide to RTMin our winter issue.)

a healthWarning!

Whether youare extendingyourlease, goingdownthe RTMroute or considering purchasingthe freehold of your block, specialist legaland valuationadviceisamust - the processmay sound simple but there are pitfalls forthe unwarysoalwaysconsult an enfranchisementexpertbeforeembarking on any of these processes.●

yashmin mistry Partner,JPCLaw tel 02076447294

Issue 16 Flat Living

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