lease extension/freehold company

[rani]

Hello all

I own a flat in a converted period property, comprising of 4 flats in total. The freehold is owned by a company , made up of the residents/owners of each flat within the property. Each flat has a lease of a similar length owned by the Freehold company.

There has been a request by one of the residents to extend their lease individually (by inclusion of a very short legal document written up by their solicitor), as they are attempting to sell their property and the length (67 years) has caused issues with the buyers solicitor.

My first question : If one of the leases is extended could this have an effect on the other Leases.

A further question. If the majority of Freeholders agree on this change can it be done or does such a change need to be agreed unanimously. The company secretary appears to have issues with this change, whilst others in our property do not feel the same ?

Many Thanks and sorry if I have not included enough relevant information,

Rani

[Donkin]

The whole idea the government brought in the laws for Company's to buy the freehold is to allow the Leaseholders to extend their leases for very little cost. Presumably the property was purchased by the company who paid a premium to the then landlord at that time

It would be usual on completion of the freehold purchase to then extend every lease to 999 years at a peppercorn rent. The cost of purchasing the freehold is offset by the value added to your flat by having a part of the freehold.

A flat with 999 years remaining is worth ~5-10% above one with 67 years remaining on the lease. If you can extend your lease for no cost, do it.

As to, can it be done without full agreement, the answer is within the rules of the company. Remember the Secretary works for the company he/ she doesn't own it. Try to find out what their issues are, it may be something reasonable which hasn't been thought of?

[rani]

Hi

thanks for the reply. When you say "the answer is within the rules of the company." can you clarify. Where should I look to find this information and whether it is possible or not to allow this change by majority of Directors of freehold company.

The secretary has not really provided any reasons why we should not allow this, except to say that she is unhappy about one flat extending their lease but not the others. Despite a letter from sellers solicitor indicating that , in their opinion, it would categorically not have an adverse affect on the other leaseholders.

It seems from your comments that we should all look at extending our leases anyway.

[Poppy]

Regardless of the rules of this company, they do not override the law. The Leasehold Reform Act 1993 makes provision for leases to be extended by a minimum period of 90 years.

I recommend that you visit the Leasehold Advisory Service (http://www.lease-advice.org) website.

If one lease is extended none of the other leases are affected. There is no need to consult other lessees. This is a matter for the lessee in question and the freeholder.

[Corinne Tuplin]

Dear Rani,

If any Director of your freehold company wishes to extend their lease or vary its terms in any way, it should be discussed at a Directors' meeting and voted upon. The voting rights of the Directors should be contained in the Articles of Association for the Company. The outcome of the vote will then determine whether or not the individual in question is able to proceed.

Many Directors may wish to obtain approval for an increase to their original term of years. They can do this at the same time. Your Company Secretary should record the motion passed by way of a Minute of the meeting.

I hope this assists.

CORINNE TUPLIN
DIRECTOR
PRO-LEAGLE
www.proleagle.com

[rani]

thanks for your further responses, very informative

Final question , and sorry if this is a very basic question. one of the issues about having a Directors' meeting and voting is that the company secretary does not live in the property and it is often difficult to arrange meetings around his shedule, whilst everyone else is owner / occupier and availablle for a short while most evenings. The matter is rather pressing, so are we able to hold a meeting without the secretary being physically present (i.e. available on conference call ) and then record/pass the vote this way.

Thanks very much for all your help

[tenant29]

You should buy a copy of the Articles & Memorandum of Association for your company from Companies House ( order by internet may be possible) and this will tell you the company rules and how many members or directors form a quorum to hold a meeting.

The proposal to extend everyone's lease by 90 years (and no ground rent collection ) can be served by written notice and set meeting date /time on all members of the company . You could also ask for early return of comments if there are any objections to be considered at the meeting. If the company secretary does not show up at the meeting, then someone else at meeting can be appointed as "temp meeting secretary" to write up the minutes of meeting and the result of voting .

But before the meeting, you should legal advice on the follow up actions ( whether the minutes of meeting recorded at Companies House would suffice ) or whether a separate document ( for each flat ) must be added to the lease records held by Land Registry etc.

[Tax Accountant]

thanks for your further responses, very informative

Final question , and sorry if this is a very basic question. one of the issues about having a Directors' meeting and voting is that the company secretary does not live in the property and it is often difficult to arrange meetings around his shedule, whilst everyone else is owner / occupier and availablle for a short while most evenings. The matter is rather pressing, so are we able to hold a meeting without the secretary being physically present (i.e. available on conference call ) and then record/pass the vote this way.

Thanks very much for all your help

It is normally not necessary for a company secretary to be present at an Annual General Meeting (AGM) or any other company meetings. I assume that an external person is presently the company secretary because he/she is familiar with the requirements of the company law. Although not recommended in your case, it is possible for one of you to be the company secretary.

What you want is an EGM (Extraordinary General Meeting). Provided all the shareholders agree, this can be called instantaneously. However, a motion needs to be passed and signed by all at the beginning whereby all shareholders agree to waive the required notice for the EGM for the purpose for which it has been convened and also agree to proceed with the EGM immediately thereafter.

It is at this EGM that the shareholders vote to extend the lease and the terms under which it is extended.

All above needs to be minuted and then the secretary needs to make sure that all minutes are filed in the company's minute book.

Depending on the terms of the existing leases, the company may be able to ask for a payment before it agrees to extend the lease.

However, I would suggest that all leases are extended by say 90 years to maintain parity between all the shareholders (who are also the Leaseholders) to avoid any possible complications in the future.

Any such extension needs to be properly drawn up by a solicitor to avoid any future complications.

The EGM part of the procedure is very simple and nothing to be too worried about. It is the legal side of the lease extension which needs to be properly handled.

Ramnik