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Leasehold / Share of Freehold?

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  • Leasehold / Share of Freehold?

    I am in the process of buying a flat. It was advertised as leasehold but I met the vendor who told me that the residents of the building had formed a company and were in the process of buying the freehold. The vendor told me that the asking price took this into account, as he has already contributed his share to the transaction.

    The building is 6 years old, so there is unlikely to be a problem with the length of the lease. The reason the residents are buying the freehold appears to be that the company owning the freehold went into liquidation in 2007. The Official Receiver and the one secured lender, a building society, are being very slow in deciding whether to permit the transfer of the property. It is possible that it will never happen.

    My solicitors don't seem to be terribly useful in advising me on the situation. I need to know:

    - Should I go ahead and buy the leasehold (what are the risks of buying a lease with a freeholder in liquidation?) ?

    - If so, should I reduce my offer to account for this? By how much?

    - Or could I purchase the leasehold for the same price but insist that the share in the freehold company be transferred to me as well? Wouldn't this mean that if the transaction never went through, the current vendor's contribution would be refunded to me?

    Any help would be much appreciated. Thanks.

  • #2
    Usually, the freeholder is responsible for maintaining the structure and exterior of the block of flats and for enforcing the leasehiolders' obligations under their leases (eg: to contribute their share of the cost of structural and external maintenance, to keep their own flats in good repair, to use the flat in a neighbourly way, etc). If the freeholder is in liquidation, these functions cannot be performed and the leases
    become unmortgagble and therefore unsellable

    The leaseholders are quite right to want to buy the freehold (in the name of their own company). Yes, ytou should take on the seller's stake in that respect, but you need to be sure that the purchase of the freehold by the leaseholders' company will, indeed, go ahead. It is not unusual for liquidators and mortgagees to be slow and, logically, they should want to sell to the leaseholders, as that should achieve the best price. However, you/your solicitor need to check that the deal is going through and will definitely be completed. Otherwise you could end up buying an unsellable flat

    If enough leaseholders are on board, they can force the sale to them, but you need to check that they are well-organised and complying with deadlines for serving notices, etc, and that they have funded the purchase

    These are points your solicitor should be checking, both for you and for your mortgage lender (if you have one)

    I hope this helps
    This is based on my experience as a conveyancing solicitor in England, but I do not accept liability for information I give in this forum

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    • #3
      Thanks JustinN,

      Yesterday I did a bit of investigating. I found out who the Official Receiver was on Companies House and contacted the examiner. It appears that the transfer may be finally moving. He gave me the details of the firm effecting the transfer. I would have thought my solicitors should do this, shouldnt they?

      My solicitors tell me, however, that they cannot contact the solicitors effecting the transfer as this is something for the sellers solicitors to be doing. They told me that all they can do is ask for updates from the seller's solicitors. This means I have to wait for X to update Y who will update Z who will update me. Is that right? Surely as the client there is nothing to stop me from from making my own direct inquiries?

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      • #4
        Nothing at all to stop you, and your solicitors are being a bit vlinkered in their attitude. Obviously, they should clear it with the seller's solicitors first; subject to that there is nothing wrong with them pushing the OR's solicitors direct - that shortens the line of communication and speeds things up
        This is based on my experience as a conveyancing solicitor in England, but I do not accept liability for information I give in this forum

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