Lease extension - shareholder of freehold

[pzl]

We have a company set up for our freehold and each of the 5 owners of flats in my building have one ordinary share in the company.

We have collectively been trying to increase the terms of our lease and add a number of modifications. I have been informed from the director (who said they were informed by the company solicitor) that we all had to agree to any modifications for them to be added to the lease. Two of us disputed some of the modifications so they could not be added.

Therefore we are now just planning to increase the term of the leases to 999 years and have a peppercorn rent. The two of us who objected to the modifications have now been told by the other shareholders we are in breach of the original lease (due to internal alterations to our flats) and therefore we can not increase the terms of our leases but that they intend to increase theirs still.

Obviously until the breach dispute is sorted I do not wish for them to increase theirs as they could prevent me from doing so in the future.

How do I find out if the increase in the terms of the lease needs to be a unanimous decision from the shareholders eg I can block them until dispute sorted or as the majority they can block me while in breach (or possibly forever!) from increasing my terms?

I have looked in the memorandom and articles of association but it does not state this information. The only relevant section appears to be VOTES OF MEMBERS which states

-Every member present in person or by proxy at a GM shall have one vote
-Reg 54 shall not apply to the company

Any help on how I can find out this information would be appreciated.

Many Thanks

P

[thevaliant]

Personally, see your own solicitor. One who specialises in this area of law.

It seems unlikely they could extend their own lease without your permission, and even if they do, you are still a joint freeholder, so what would it matter that they had 999 years and you had only 80 (well... it will technically matter).

If you want, threaten to get nasty and keep calling EGMs to discuss the matter!

[sgclacy]

Ordinarily the company can act based on the voting majority of its directors and shareholders. Therefore it can extend some and not others if that is its desire.

HOWEVER if a lease is extended then the company can expect to receive a premium for a lease extension based on normal commercial terms. If the company is going to do this for some of its members whilst denying others without seeking a premium then it is “a fraud on the minority” . It can only grant lease extensions without seeking a premium if it does it for all.

You of course still have the right to seek a lease extension under the Act but you would have to pay a premium

[Gordon999]

Sglacy has a good point. Unless everybody gets the same benefit, then each must pay for lease extension.

Ask your joint solicitor to send a letter to other directors on this point. Usually the changes to your lease should be (1) extension of term years at peppercorn rent and (2) service charge payments and adding reserve fund.

What kind of internal alteration has caused objection by other 3 flats ? How does internal alteration affect the value of other 3 flats ?

[surreygirl]

You are just simply being held to ransom over your disagreements to the modifications to the lease. However I was told that if you are a freeholder no premium can be charged for extending the lease. Is this not so!

[jeffrey]

You are just simply being held to ransom over your disagreements to the modifications to the lease. However I was told that if you are a freeholder no premium can be charged for extending the lease. Is this not so!
No. Anyway, OP is not a freeholder. He/she is at most a shareholder in (and a member of) the freehold reversioner.

[thevaliant]

Having read sgclacy's post, I would agree completely!
Don't allow the other three to extend without being charged a suitable premium (rather than the nil you would've charged if ALL lessees had extended on the same terms).

Get a solicitor to point this out. You could do it yourself, but I think it might be unwise.

[surreygirl]

But Jeffrey, you have stated in your reply to me dated the 24.10.08 that "no premium should be payable if lessess already collectively own the f/h only legal fees for new deeds" Is this not so then!

[thevaliant]

But Jeffrey, you have stated in your reply to me dated the 24.10.08 that "no premium should be payable if lessess already collectively own the f/h only legal fees for new deeds" Is this not so then!

I would normally agree with the quote, but in this instance it would be perverse.

Imagine the situation:
Three out of five flat owners (f/r shareholders) get together and extend their former 99 year leases (with, say 50 years left) to 999 years, presumably by surrender and regrant. They pay no premium (let us say).

The two lessees who were prevented from extended to 999 can now only either:
a) Take statutory option to add 90 years, with premium which I'm sure sgclacy could tell us what premium would be - Not fair!
b) Wait for fifty years to pass and then lease ends! If this company is limited by shares, this is bad enough because they would presumably have to repurchase a new lease, of which the would then get a 1/5 discount when the 'sales' money came to the company. If limited by guarantee, there are usually rules about being a member and also being a lessee. As they were no longer lessees, they presumably lose their flat - Not fair!

Put simply a 'majority' of the flat owners could collude to (in the long run) effectively take the minorities flats from them.

This doesn't seem right and so:
1. A fair premium MUST be charged by the company, there are rules regarding protecting minority shareholders in companies (the minority in this case is 40%! Not insignificant). OR
2. Everyone extends to 999 years at same time.

[surreygirl]

But that is what has happened in my case! three of the flat owners have extended their lease´s whilst I was waiting for the changes in the lease to be agreed so that we could all change our lease´s together. However I have now recieved minutes which have stated that three of the shareholders have now extened their leases to 999 and that there will be a year when everyone can extend their leases after that time their will be a premium to pay!

[thevaliant]

But that is what has happened in my case! three of the flat owners have extended their lease´s whilst I was waiting for the changes in the lease to be agreed so that we could all change our lease´s together. However I have now recieved minutes which have stated that three of the shareholders have now extened their leases to 999 and that there will be a year when everyone can extend their leases after that time their will be a premium to pay!

You need to check:
1. Whether they really have extended to 999 years or not.

If so, you need to ask (as a 17% shareholder) why a proper premium was not paid. The directors (and that may include you) are negligent in not securing a proper premium to compensate those not allowed to extend.

See a solicitor.

Remember the fundamentals.

If everyone had 50 years left, and three extended at no premium, those three have gained a benefit at the detriment of the other two. Either the other two must sue (as soon as possible) or be allowed (and promised perhaps via deed) to also extend to 999 years at no premium.

[surreygirl]

Well that is good advice. Yes they have extended their lease´s to 999 years. No premium asked for. I did not know about it until informed in minutes the other day. It is explained in the minutes that I can extend within the next year with no charge but after that apparently I will be charged - so the minutes say! -. I was waiting as explained for the changes in the lease to be mooted and then the lease was meant to be changed and we would all extend etc together but that hasnt happened!

The thing is that if I extend now there will be another charge when we change the lease by way of DofD or Regrant etc.

I think what Jeffrey meant was that if we all changed the lease´s at the same time no charge can be made etc.

[jeffrey]

I think what Jeffrey meant was that if we all changed the lease´s at the same time no charge can be made etc.
Yes. If all do the same, what they pay-in exactly equals what Co. would pay-out.
Where only some extend, they have to pay-in; those who don't extend don't pay-in.

[jeffrey]

Also, it's far more cost-effective to rewrite all leases simultaneously. They can be completed/registered together, avoiding discrepancies and the possibility that one lessee will want a different wording later on! I know- I've been there and clients have faced that...

[surreygirl]

Well quite. This is what I thought and I put this in my letter etc., but they have gone ahead anyway! and three leasee´s, shareholders have now extended their leases whereas I was waiting for the changes in the lease to me agreed. Now I have received communication from said Company Secretary - who it appears is neither an owner nor a shareholder - to say that three of the leasees/shareholders have extended their lease! Now if we want the lease changed by DofV or Regrant and whatever there will be extra charges. But I have been warned - by said Company Secretary - that if I dont extend my lease within a year (regardless of changes necessary in the lease - I will be charged a premium!

[Gordon999]

So you have to extend now and argue later.

[surreygirl]

Yes but there is a catch to it. If I extend now I have to agree to the changes in the lease that they want which is a change from the decorations which are based on a pro-rata ie size of the flat to change to a fixed 1/6th charge for all leaseholders regardless of size!

[thevaliant]

Yes but there is a catch to it. If I extend now I have to agree to the changes in the lease that they want which is a change from the decorations which are based on a pro-rata ie size of the flat to change to a fixed 1/6th charge for all leaseholders regardless of size!

So who is paying the shortfall then? You have six flats. Three have extended to 999 years and *also* changed their lease to 17% contribution, this won't work!

Eg: Formerly:
Flats 1-3 paid 20% each
Flats 4-6 paid 13 1/3% each

Now you say three have already extended. If we assume that this is the first three, then present setup would be:

Flats 1-3 pay 16 2/3% each
Flats 4-6 paid 13 1/3% each
Total = 90% - Who pays the other 10%?

Personally Surreygirl, you seem unwilling to see a solicitor, you live in Spain and you don't seem willing to correct the multitle of problems you have in your flats. I would sell up.

[surreygirl]

I cannot sell up! neither can I afford a solicitor to sort out the multiple problems.I am doing the best I can, I am trying by communications etc to sort it all out, I cannot do much more! Solicitors are for the rich, I am not that by a long way. I do want to sell up but not much good with lease extension still to be organised and changes to the lease to be sorted out. Why should I be bullied out. This is why I am posting on this site to try to too my best. Heavens I have certainly done that.

Set up Residents Association when under Freeholder
Purchased the lease so all could enjoy
Set up limited company
Sorted out the lease by applying to LVT so that the lease is now understood by all.

Selling up is not an option at the moment (if only it were!) I would sell tomorrow if I could.

Meanwhile I have to choggle on and get advice where I can and keep at it.

[jeffrey]

In view of your copious posts and long threads, on problems still unresolved, a solicitor is precisely whom you do need.
LZ members have been remarkably patient so far in assisting you.

[surreygirl]

LZ members have been remarkably patient so far in assisting you.

Indeed you all have and very much appreciated too.