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Share of assets after selling share of freehold building

6 replies

Creakin4 · 04/03/2023 19:04

I am really concerned that my elderly mum is being bullied into receiving less than her fair and equal share of the sale of a building where she owns a flat. There are seven flats in a large Georgian house, where the owners have all agreed to sell the entire house to a private buyer. The management company, set up by the 7 owners, each own an equal share of the freehold, but some of the smaller flats pay a lesser percentage of the service charge. The dispute is whether or not, on completion of the sale, the proceeds should be divided as per the varying percentage service charge, or as per the equal share of freehold. I believe, as does my mother, that it should be divided equally, as per the share of freehold. But others, in larger flats, are pressuring her to take a smaller cut. We are seeking legal advice, but it will no doubt be at large expense, which I feel is also something that should be divided equally. Any suggestions/legal interpretations welcome. Thank you very much, it’s a stressful situation which my mother is really struggling with.

OP posts:
Hottytotty · 04/03/2023 19:11

I had a flat in a similar building where the service charge was proportioned according to floor area, though I can’t remember how the share of the freehold was divided.
IANAL but I should have thought that the larger flats should get more, as they would get more on the open market. How does the price being offered per flat compare to the market locally?
After all the buyer isn’t just buying the freehold. They are buying the flats (the value of which will vary largely according to size), plus the freehold (which is divided equally). Perhaps if the valuation was divided up like that, you might feel better about the smaller flat owners getting less?

mynameiscalypso · 04/03/2023 19:18

I would expect it to be done on square footage - when we bought a share of the freehold in our old building, the cost to buy in was based on the size of the flat although all the owners have the same number of shares.

hettiethehare · 04/03/2023 19:23

If they are selling the whole building, then they buyer will be buying the freehold and the leaseholds of all the flats.

I used to live in a similar set up where we all owned equal shares of the freehold, but the service charge (loosely) reflected the relative sizes of the flats. I was in the largest flat and had the biggest service charge, but also had the most valuable flat as it was considerably bigger and had a private garden.

I wouldn't have thought that dividing the proceeds by service charge is fair either (our flat was worth proportionally more than was reflected in the service charge) - I'd expect each flat to be valued by an independent surveyor relative to the others and it worked out that way.

Creakin4 · 04/03/2023 20:11

Thank you for your replies so far. I think it reflects the need for independent legal advice.
I understand the initial response that larger flats should receive a bigger proportion of the sale, but it is complicated, as none of the flats are currently able to be sold individually, due to longstanding issues over building maintenance and improper management of funds (a leasehold property manager defrauded the residents management company to a tune of tens of thousands and disappeared) It has been going on for years. But looking at it from a purely legal perspective, the original property developer wrote into the leases, that share of assets should be divided equally, this going back to the 80’s. None of the existing owners seem to be able to accept that. Such a sad way for my mum to spend her final years, especially as she has tried so hard to resolve so many of the issues caused by unscrupulous leasehold management companies, with absolutely no help or thanks from most other flat owners. Such a sad and sorry tale. Moral of the story, avoid leasehold flats, just not worth the hassle.

OP posts:
SeasonFinale · 04/03/2023 20:15

The fact remains is that there should be 2 elements. The freehold is owned equally and therefore that element is split equally between the 7. The remainder relates to the leaseholds and that element should be divided in accordance with size of the flats. A surveyor or valuer should be able to split the amount and how much relates to each starting portion.

Isinglass20 · 16/06/2025 12:41

Was there a deed of trust held by each unit holder which confirms each unit holders contribution that is the amount of premium they paid

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