Share of Freehold Confusion

[ShareOfFreehold]

Hi all,

Any advice on this gratefully received. I have had an offer accepted on a flat in London, in one of the developments at Canary Wharf. It was advertised as share of freehold, which is also what is stated on the memorandum of sale.

However, the title register gives the building management company as the freeholder, and each flat in the building as having a 125 year lease, starting in 1995 (so 96 years left).

I think the way it's supposed to work is that each flat has a share in the management company, so it's effectively share of freehold. I've been assured by the agent and my solicitor that this is quite a common set up in this type of building, and all that will happen when the leases are up is that the "tenants" collectively renew it, presumably paying some kind of admin fee, and / or possibly also legal fees.

Does any of this sound dodgy or unusual? Are there red flags? Could we be rinsed when it gets closer to the end of the leasehold period and could the length of these leases affect resale value, even thought we're supposedly in a form of shared freehold?

I hope this makes sense! Any thoughts or experiences of this type of thing would be very welcome.

I had this set up, but your solicitor needs to check the management company share is signed over

If you have a share of the freehold there should surely be paperwork attached to the sale details to that effect? I dont understand what you are being told and it makes no sense to me.

I am a solicitor but have never done conveyancing.

As I understand it, once the term of the lease is over it reverts to the freeholder. 125 years is not that long either.

As leaseholder you have to extend the lease to avoid the above happening, the terms of which will differ for every lease.

You solicitor should know what they are taking about so get them to explain it so it makes sense. If it doesn’t, get another solicitor? Or walk away

You should ask to see the articles of association for the management company, This should explain how the Freehold is managed. It is better than having a absent freeholder but how that company works is crucial. A large proportion of the flats will be owned by landlords who may not be as invested in running the block well as owner occupiers. Does the company have elected directors for instance?

I own my flat (well I have a 999 year lease). I also own a 1/28th share of the freehold company.

Separately we employ people to take care of the dat to day management.
I am also a director of the freehold company with another resident.

As it's a company limited by guarantee then I can't see a shareholders list at companies house but I got paperwork transferring the share /being a member to me when I bought.

When I owned a share of freehold flat I paid a peppercorn rent (i.e nothing) and had a lease - but it was 999 years rather than 125 so the question of renewal was never likely to arise. The documentation made it very clear that the freehold was owned and managed by a private ltd company comprising flat owners in the same block and that each flat came with 1 share. There should be similar paperwork for your block - I'd want to see that before going any further!

It sounds like the manco owns the freehold, and you all have shares in the management company. This is completely normal in a situation where the leaseholders have been gifted the freehold.

Usually what happens is as and when you want to extend your lease, you are able to make an application to do so - you apply to the board of the manco and engage your own solicitors to undertake the paperwork; the cost of which will be down to you to pay.

In my experience leaseholders generally only do this when the lease gets short enough to become problematic - either with selling or remortgaging. Otherwise it can cost you money to re-register your lease with the mortgage company.

The other situation is where a separate freehold company is set up, and this often happens where leaseholders buy the freeholder en masse, but not everyone contributes so not everyone is entitled to membership immediately. You can quite often purchase a share of freehold later on and become a member of the company (and quite often will be encouraged to do so rather than a standard lease extension, which is of course a leaseholder's right but often costs as much as just buying the share and getting a 999 year lease as part of it!).

Yes, it’s quite standard.

There will always be a lease, and then the share of freehold would be a separate arrangement. It means for any lease renewals etc you have to effectively negotiate with yourself and the others who have a share in the freehold. It means you can basically charge yourself a nominal amount to renew the lease, rather than the thousands of pounds a professional freeholder would charge.

Perfectly normal way of doing things. You just need your solicitor to properly investigate and explain the situation to you.

Great, thanks everyone, all very reassuring!

Yes we own freehold in exactly the same way. It’s the only way to do it in a shared property as far as I am aware.