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share of freehold and right to extend lease

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  • share of freehold and right to extend lease

    I leave in a share of freehold flat. The freehold is owned by a company subsequently owned by each flat (4) in the building.(I own 25% of the freehold company) We do not pay ground rent to ourselves. The objective of the Company is the following according to articles of association is:

    To acquire the freehold title and to manage land and building and to grant leases of the said flats on such terms as may from time to time seem expedient

    To act as an association of owners to manage the building

    The income and property whensoever derived of the Company shall be applied solely towards the promotion of the objective of the Company as set for above and no portion shall be paid or transferred directly or indirectly by the way of dividend, bonus or by way of profits, to members of the Company. A payment can only be maid to an officer or member in return of services rendered to the Company

    My question is if whether the majority of the freeholders can ask the minority to pay for the lease extension in the same way that an external freeholder could request a premium in the open market.

    I seen some posts in the internet where there are differences between freeholders and they refuse to grant the lease extension or request money. I am in a similar situation where I am trying to sell my share of freehold flat and I need to extend my lease as is 71 years left only. The other freeholders are holding me at ransom due to a previous dispute however I think that I have the right to extend without paying a premium.

    Therefore, according to Companies Act 2006 Section 44(2)(b), I should be able to execute the lease extension by deed as a single Director and simply inform the fellow freeholders of what I have done.

    Would this be the right way to proceed? Would this be legal or can I run into any problem?


  • #2
    Re: share of freehold and right to extend lease

    Though as a director of the company you have ostensible authority to act in its name (ie: a third party would be entitled to assume that you, as director, spoke for the company), you do not in fact have authority to extend the lease for your own benefit, as you would need a majority of the directors to agree

    You therefore cannot simply grant yourself an extension

    If you and your co-directors cannot agree on terms to extend your lease, you may have rights to insist on an extension (that you would have to pay for) under the relevant legislation

    You do not have a right to insist on a free extyension simply because you are a 25% shareholder in (and a director of) the company that owns the freehold

    However, the other directors/freeholders must not treat you any worse than they treat each other: if you have to pay for an extension, they all have to
    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


    • #3
      Re: share of freehold and right to extend lease

      The Company approved in a resolution in the past (before I purchased this property) to grant virtual lease extension to all leaseholders, after the freehold was purchased.

      Therefore the previous resolution is binding and needs to be implemented and I cannot be treated differently. The flats in this building have been purchased under the assumption that the lease extension was a "given". The Directors are clearly abusing a position of power putting their personal interest first.

      How can I solve this situation?


      • #4
        Re: share of freehold and right to extend lease

        Fair comment - have you made this point to the other directors? If you have (or do) and they still refuse to budge, you can threraten them with an application to the counrt under Part 30 of the Companies Act 2006, under which the court can order the company to grant an extension in accordance with its resolution.

        However, you cannot grant yourself that extension
        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