Crown/Treasury Solicitor replaces dissolved f/r mgt. co.

[Mukker]

Hi, I have a flat in East Sussex that myself and 4 other lessess are buying the freehold of the main property, we have heard from our solicitor that the freeholder has dissolved the company and now the freehold is in the hands of the treasury, although this is all very well and looks like we will get the Freehold at a much lower price, the freeholder dissolved the company nearly 2 years ago, however his/our Managing Agents have sent us a Tenant Demand for over £500 each for service charges dating back to year ending 2003 to 2005 and Ground Rent for 2006 in advance,I do understand the forfiture law regarding Ground Rent and have always paid on time but I have today written to the Managing Agent demanding a detailed breakdown of all the charges, my question is, if the Freeholder has dissolved the company and is no longer registered at Companies House how can he legally demand money from us? if anyone could enlighten me as regards the legal situation I'd be very grateful.

[Tax Accountant]

Presumably the managing agents are continuing to act for the new freeholders.

Service Charges would presumably continue to accrue and would need to be funded by the leaseholders regardless of who the freeholder is. Likewise, groung rent will continue to accrue and would be passed on to the new freeholders.

Your lease should provide details of how the service charges and ground rent is administered.

These are just my thoughts and not necessarily the legal position.

[Mukker]

Just to clarify, the Managing Agent is still representing the original Freeholder, ie the one with the dissolved company, hence the question regarding the legallity of the demand.

[Paul_f]

You need to establish formally that the company is in receivership and you can find this out from the Official Receiver's office.

As for the agent, they don't appear to have any rights of demand for ground rent etc. unless they have documentation proving they are being allowed to act on behalf of the Official Receiver - it won't be the company if they have ceased trading. The agent could possibly have slipped up and is being asked for ground rents it should have previously collected and is back-tracking!

If you are not sure about anything take any documents you have or can acquire, to an Insolvency Practioner (look in Yellow Pages for a local one) who will be familiar with this. In the meantime don't part with any money!

[Poppy]

Mukker, will you please clarify who owns the freehold:
1. Is it a private individual?
2. Is it a company?

Was a management company set up to collect service charge and rent?

[Mukker]

Thanks for the info Paul, Poppy, the demand from the Managing Agent states the Landlords address being the old freehold company, which my solicitor dealing with the freehold purchase says is dissolved, I have also checked online with Companies House, this also tells me this company is dissolved.
The Freeholder who 'runs' this company has an horrendous reputation in East Sussex and has featured in the local press in illegal forfiture cases, although this isn't my main concern, however I don't intend to be ripped off by him.The Managing Agent was indeed set up to collect Ground Rent and Service Charges, however the Managing Agent is fully aware of the freeholders reputation and the position of the dissolved company which I find very unusual, I will contact my solicitor regarding this situation, however I wanted to collect as much useful information before hand.

Many thanks.

[Fee]

I am buying a flat and have just been informed by my solicitor that the company that owns the land the flats are built on went into liquidation a few years ago. Effectively this means that there is no freeholder/landlord.

It appears that lessees/tenants are themselves managing the property on an informal basis and insuring their own flats.

Tha seller has agreed to pay for indemnity insurance but this will only run for 25 years.

I have arranged to see my solicitor to discuss this matter as I am confused about what this all means and I'm not sure if buying this flat is such a good idea as it may be difficult to sell in the future with no lease. Any advice would be appreciated.

Thanks:))

[sgclacy]

This may not be such a problem as you might think.

If a limited company goes into liquidation the assets pass to the Crown. The Crown will take no role in managing the property ie insuring or collecting the ground rent.

The crown will normally sell the freehold for a modest sum of around 10 years purchases unless the leases are below 60 years see the following link http://www.bonavacantia.gov.uk/default.asp?PageId=1327.

It should be a relatively simple matter to get your fellow lessees to join you in the acquistion once you become a lessee. It is in all their interests that this matter is resolved, as you have seen

[jeffrey]

I agree with sgclacy, and of course the lease itself is still OK despite f/r going down the pan- so not correct to say that in future you'd have to sell with "no lease".

[Richard Webster]

Not all mortgage lenders will accept these indemnity policies so if you don't sort out the matter in the manner suggested by sglacy there could be a problem selling in the future.

Although it may be sensible thing to do you will have to persuade a majority at least of the lessees to set up a company to buy the freehold from the Crown and you might find resistance from others who can't see why it is necessary.

As a conveyancing solicitor I believe the information given in the post to be useful but I accept no liability except to fee-paying clients

[jeffrey]

Fee: how long is the term on each lease? If <80 yrs unexpired, urgent action is needed; if hundreds of years, less urgent.

[Fee]

Thanks for the advice!! Not sure how long the lease runs for but going to see my solicitor on tuesday so should find more out then:))

[Kay]

The company that owns the freehold and insures the property has been struck off due to non filing. The court hearing for it to be reinstated is 5 October.

Does anything need to be done to make sure that the propety is still insured in the mean time.

[jeffrey]

The company that owns the freehold and insures the property has been struck off due to non filing. The court hearing for it to be reinstated is 5 October.

Does anything need to be done to make sure that the propety is still insured in the mean time.

Yes. Obviously tell insurance co. of dissolution; and change name of policyholder to something like "Lessees of 123 Something Street".

[thevaliant]

This is more just a hypothetical question, it hasn't happened to me, and I hope it never will.

If a flat management company, which is also the landlord (holding the freehold) is struck off the register at Companies House, what are the consequences?

I understand a company can be reinstated up to six years (at some expense), possibly up to twenty years(?).

If it was struck off, and couldn't be reinstated, what happens?
When I first moved in, the builder warned me not to have the company struck off because 'I wouldn't be able to sell', but reading from these forums, this doesn't appear to be the case?

Thoughts?

[jeffrey]

1. Dissolved company's assets vest in the Crown.
2. Treasury Solicitor (Bona Vacantia Dept.) is the point of contact.
3. To reinstate company, a High Court application is needed.
4. The company's missing years' Annual Returns and Accounts have to be prepared and submitted too.
5. If company is reinstated, assets revest in it.
6. None of these problems affects the leases' validity, except that a prospective purchaser will require a protective Indemnity Insurance policy (@ premium of £200 & upwards, depending on leasehold propoerty's value).

[jeffrey]

...and check that all premium payments are up-to-date, of course.

[Richard Webster]

i have a question related to the original poster's query.

can a struck off m co still request maintenance charge?

if a tenant refuses to pay can the m co take the tenant to court to enforce payment?

That's the whole point. M Co doesn't exist so it can't!

Of course the tenant would still have to lodge a defence stating that the company had been struck off etc - if nobody does anything the court procedure just keeps grinding through - they don't check that kind of thing if no one objects.

In practice it sometimes happens that the people who have been "running" the M Co don't really understand what is happening, and they still think in some way the company does exist. I have seen letters from people purporting to represent a struck off company (who are still in fact collecting the service charge etc) actually saying things like "we are not a company..." and then enclosing a copy of the company's certificate of incorporation!

[jeffrey]

i have a question related to the original poster's query.

can a struck off m co still request maintenance charge?

if a tenant refuses to pay can the m co take the tenant to court to enforce payment?

No and no. A dissolved company does not exist.

[rick1976]

i hope the original poster got the problem sorted out.

Is there any difference if the company did not own the freehold?

If a m co which does not own freehold is struck off what is seized by the crown? Do the residents suffer the same consequences as they would have done if the company had owned the freehold?

[jeffrey]

1. When a co. of any type is dissolved, its assets vest in the Crown.
2. So it depends what assets the co. has.
3. Assets held on trust should be unaffected. The Treasury Solicitor (for the Crown) will re-route them to the rightful beneficial owners.
4. The Crown can disclaim onerous assets (e.g. reversion, if lease imposes significant obligations on now-dissolved co.)

[rick1976]

What practical issues do the residents have in the case the freehold is not owned by the m co?

Are they unable to sell their property.

[jeffrey]

What practical issues do the residents have in the case the freehold is not owned by the m co?

Are they unable to sell their property.
No. As long as there is a buildings insurance policy for the block, the "dissolved freeholder" problem can be covered by an indemnity insurance policy @ from £200 [val. < £100 000] to £800 [val. between £0.75m and £1m]. These premia are Countrywide's; GCS's are similar but have more steps in the scale.

[ildigv]

interesting.

what difference is there between a struck off managament company that holds the freehold and one that only holds the head lease?

To be more exact if the freeholder is another company but there is a m co that owns headlease and this is struck off. Does the freeholder still lose out?

[jeffrey]

interesting.

what difference is there between a struck off managament company that holds the freehold and one that only holds the head lease?

To be more exact if the freeholder is another company but there is a m co that owns headlease and this is struck off. Does the freeholder still lose out?
Difference:
1. (Dissolved leasehold reversioner) Freehold reversioner could forfeit leasehold reversion; underlessees would have right of relief against forfeiture.
2. (Dissolved freehold reversioner) That would not apply.
3. Either way, the dissolved company's assets vest in the Crown. If they are onerous, the Crown can disclaim. This might in fact lead to the freehold estate disappearing; the Crown would then have to re-grant it.
4. (Dissolved company does not own) If the company has only contractual rights/duties in lease but owns no reversion, the lease should state that reversioner has reserve powers to manange and collect service charge.
5. Further problems attend cases where lease prohibits Transfers except with consent from mgt. co.- if it is dissolved, it cannot consent. In that case, contact HMLR for guidance and perhaps a Special Order of the Chief Land Registrar.

[Jamescummings23]

Does anyboby have any advice in respect of this?

I am in the process of purchasing an apartment within a block of 6 in cornwall on a decreasing 999 year lease. I have been informed that the management company responsible for the apartment block and associated communal areas was disolved in 1995 and as it currently stands, in the absence of any freeholder, title of the property (apparently under some old statute) currently lies with the Duchy of Cornwall.

Letters have been written to the existing leaseholders in respect of reforming the management company to which however no responses have been (or are likely to be) forthcoming.

I have been informed that the vendor of the apartment I intend to purchase will have to take out an indemnity policy to cover me against this however it has yet to me made clear what exactly this indemnifies me against.

My question is, how in this situation, can maintenance works be properly managed and who is responsible for ensuring any required works are undertaken and paid for? In addition, is it possible to be insured against this sort of thing as I assume assume if I took out my own policy it would only cover the particular part of the property I own?

In this situation, is purchasing simply a bad idea or am I worrying about nothing?

[jeffrey]

The collective lessees retain enfranchisement rights- 1993 Act- and should contact:
a. the Treasury Solicitor; or
b. (in Duchies of Lancaster/Cornwall) the Duchy Solicitor.
The Crown/Duchy will allow enfranchisement and co-operate with sale of f/r to lessees (who will need to form a new RTE company, pref. limited by guarantee) at a reasoanble price. Your V's solicitor should be aware of this.

[Poppy]

I don't really think this is likely to happen any time soon if the previous management company was dissolved in 1995. I wouldn't hold my breath.

Setting aside indemnity insurance for a second. Have you obtained a full structural survey on this building? Are any major maintenance works required? At the very least surely you want to know the state of this unmanaged building? How are renewals, repairs and maintenance carried out and paid for? Do any lessees owe money for maintenance or whatever? Is the building itself insured?

[thevaliant]

I would agree with Poppy. You are buying:

A leasehold flat with significant length of time to run on the lease (I assume 999 years was not granted back in the 11th century).
The landlord is Duchy of Cornwall, who won't be interested in doing any building maintenance, even though technically responsible.

Your problems:
The company was dissolved in 1995. This is not normally a quick process. It takes significant overdue accounts and AR to strike off. I assume it has been ignored since at least 1993 therefore.

Since that time, NO other lessee has taken up the bat and ran with it. Clearly this suggests lack of interest (how many flats are there?) in there part and they do not see the wisdom in resurrecting company.

Thoughts - Buy by all means, but be aware building may not have any maintenance on it for years and lack of apathy means to get anything sorted YOU will have to do the legwork (other owners clearly won't).

[Jamescummings23]

Many thanks for your thoughts and time on this.

In answer to Poppy's question no I havn't had a full Structural Survey carried out, just the banks valuation survey. I am waiting until I find out more about this indemnity policy and what it means for me before I potentially throw any more money away. If I do proceed however I will be having a full survey undertaken in light of your collective comments with regard to possible lack of maintenance over the years, very good points which could well effect my offer!

I have been informed by the agent that the leasholders collectively 'chip in' for any maintenance or repair costs and have some sort of buildings insurance for the block that they all share equally. My concern is that there is no enforceable procedure in place to manage this process therefore there is always the risk that not everyone will fulfill their obligations.

It almost sounds as if the tenants are in effect the management company!

[jeffrey]

I have been informed by the agent that the leasholders collectively 'chip in' for any maintenance or repair costs and have some sort of buildings insurance for the block that they all share equally. My concern is that there is no enforceable procedure in place to manage this process therefore there is always the risk that not everyone will fulfill their obligations.
This is precisely why there is a problem. V has it, currently. Do not volunteer to assume the risk unless tyou are fully aware of the downside and V pays for proper protective indemnity insurance. If you are financing the purchase by mortgage advance, your solicitor MUST disclose to the prospective mortgagee all aspects of the problem. Generally: if not fully happy with what is on offer, walk away now before it's too late.

[thevaliant]

I have been informed by the agent that the leasholders collectively 'chip in' for any maintenance or repair costs and have some sort of buildings insurance for the block that they all share equally. My concern is that there is no enforceable procedure in place to manage this process therefore there is always the risk that not everyone will fulfill their obligations.

It almost sounds as if the tenants are in effect the management company!

Added to Jeffery's note of caution:

1. The tenants have no obligation, or at least if they do, it is only enforceable by the Duchy of Cornwall (who will not do it).
2. The tenants would've been the management company originally. It sounds like a flat management company held the freehold, no one really knew what to do and it got struck off.

I personally would be walking away, indemnity or no. How do you really know that (or can guarantee that):
a) Everyone is contributing?
b) Everyone is contributing EQUALLY (or fairly)?
c) Everyone will continue to contribute (the latter is a killer - Flat 1 may be friendly NOW, but a sale will change owner to perhaps one who sticks to the law and pays nothing)?

You could buy the flat, and then start the process to get a new company up and running and buy the freehold, but I assume such a process is lengthy and requires consent from other lessees. You can assume that if they presently consider a 'gentleman's handshake agreement' presently sufficient they won't want to pay for proper legal advice/fees.

[Jamescummings23]

Thanks for all your help with this, you have definately confirmed i am not if fact worrying about nothing and that my initial concerns are warranted. Point c) made by thevaliant was definately what I was also thinking.

I will be raising all these points with my Conveyancer tomorrow (may as well seeing as i've already paid for it). If he cannot confirm anything to the contrary in respect of these concerns, I think I now know the sensible course of action to take.

Thanks again!

[jeffrey]

Thanks for all your help with this, you have definately confirmed i am not if fact worrying about nothing and that my initial concerns are warranted. Point c) made by thevaliant was definately what I was also thinking.

I will be raising all these points with my Conveyancer tomorrow (may as well seeing as i've already paid for it). If he cannot confirm anything to the contrary in respect of these concerns, I think I now know the sensible course of action to take.
If nothing else, this may concentrate V's mind- and the minds of the other lessees- with a positive impetus to resolve the problems.

Always remember: P can buy any property. V only has this one to sell. The buck (and the property) ought to stop with V!

[Poppy]

This unhealthy situation has continued for 14 years (probably longer). The existing lessees really ought to resolve the matter as quickly as they can with legal assistance. It is definitely possible to resolve the situation satisfactorily, but the existing lessees must want to do so in the first place. Unless of course you want to get involved if/when you buy.

[londongal]

We were in a similar situation recently. The original management company was dissolved in 1974 and maintenance was being done on an adhoc basis, organised by one or two interested house owners. There was no insurance and there were problems making some awkward owners pay towards maintenance works. We knew we'd have problems trying to sell our house so we decided to buy back the freehold. We could have bought it on our own but all the other owners decided to take part and share the costs. Buying it from the Crown was easy; the Treasury Solicitor did most of the work for a low fixed fee and it was the fastest conveyancing work ever! Search 'bona vacantia' on the internet and you'll see what is required and the fees that will apply in your situation. We created a new management company to own the freehold.

The main problems come with running the company and having to worry about what each lease says in terms of service charges; what's payable, when they're due etc and having to abide by the regulations regarding consultation etc. We're hoping that outsourcing this to a managing agent will help resolve these issues.

I hope this is of help.

[Richard Webster]

It is bad enough if the management company owned the freehold. All that's needed is for the lessees to get together and negotiate with the Duchy or Cornwall. If the leases provide that the freeholder has to maintain the structure and insure then a new company acquiring the freehold will take on those responsibilities. Problem largely solved. Others have already pointed out that this doesn't seem likely to happen quickly because of the evident inertia since 1993.


What could be even worse would be if the management company was specifically mentioned in the lease as having the maintenance responsibilities without having the freehold - a "free standing management company", and no "fall-back" covenant by the freeholder to do this if the management company did not do so. In that situation it would only be that company that had the duties and a new company even with the same name wouldn't automatically take them over. A new company formed by the lessees that bought the freehold would then have the further work and cost to vary all the leases to include a lessor's covenant to maintain the structure and insure etc.

So from a buyer's point of view I would leave alone. Even if the indemnity insurance appears to cover you there is no guarantee a future buyer's mortgage lenders will accept it.

[sting2]

A (partly) hypothetical question for the experts on here ...
A developer has built a 3 storey apartment building containing 16 apartments but only sold leases on 6 apartments in the block before going into liquidation.
There is no management company in place and the leaseholders are worried about general decline of the building.

Looking on Land Registry indicates that leases were created for the remaining unsold and empty units but were not sold before the freeholder went into liquidation.

So my questions are ....
As I understand it at least 50% of the leaseholders in a block are required before leasehold enfranchisement can take place so is this possible with only 38% of the units constructed having been sold?

Will the freehold for the building (as well as the freehold of the unsold apartments have gone to the crown? and If so should we be talking to the Treasury Solicitor to establish if the crown will sell the freehold to a new company which we establish to buy the freehold and manage the property ?

Can the new management co sell leases on the remaining (unsold) apartments ?

Sorry its a little vague - I didnt want to post war and peace.
Thanks in advance

[sgclacy]

In this case it will be the administrator/receiver who will control the position as they will own 10 of the 16 flats.

Therefore administrator/receiver appointed by the lender/creditors can sell the freehold and manage the property.

However administrator/receiver cannot abandon the freeholders covenants to insure or manage the units that have already been granted, if the freehold along with the 10 flats vested with the bona vacanti then the crown do not have to do anything. This is unlikely to arise as I assume there is a mortgage/charge against the development

If the situation arose where no management etc was taking place you could apply to the LVT to have a manager appointed to run the building, however in reality the administrator/receiver would wish to protect the assets i.e. the 10 flats and will presumably maintain the building so the flats can be sold/rented out.

[LongsufferingLeaseholder]

The fact that the other flat owners let the management company get struck off and then did nothing to form a new one paints a very alarming picture.

Have you tried knocking on the front doors of a few of the other flats there in the evening or at the weekend to see what the other owners are like and what their view is on the situation. Also are all the other flats owner occupied or are some of them perhaps owned by dodgy landlords letting them and so who can't be bothered to sort matters out as they may own a whole series of flats in the area.

The vendor must have already had severe problems trying to sell the flat and probably couldn't believe his lucky stars when you came along. Really if I was you I would refuse to proceed unless the vendor is prepared to organise a meeting with as many of the other leaseholders as possible to see what their views are on the current situation and whether they care about sorting this out. If he can't or won't organise such a meeting then your next course of action seems obvious - i.e. don't touch it with a bargepole.

[jeffrey]

The fact that the other flat owners let the management company get struck off and then did nothing to form a new one paints a very alarming picture.

Have you tried knocking on the front doors of a few of the other flats there in the evening or at the weekend to see what the other owners are like and what their view is on the situation. Also are all the other flats owner occupied or are some of them perhaps owned by dodgy landlords letting them and so who can't be bothered to sort matters out as they may own a whole series of flats in the area.

The vendor must have already had severe problems trying to sell the flat and probably couldn't believe his lucky stars when you came along. Really if I was you I would refuse to proceed unless the vendor is prepared to organise a meeting with as many of the other leaseholders as possible to see what their views are on the current situation and whether they care about sorting this out. If he can't or won't organise such a meeting then your next course of action seems obvious - i.e. don't touch it with a bargepole.
At least on this point, I agree with you! Dissolved mgt. cos. are a real pain, although the Treasury Solicitor is often helpful, and lessees might need to re-enfranchise under 1993 Act.

[thevaliant]

I have been informed that the vendor of the apartment I intend to purchase will have to take out an indemnity policy to cover me against this however it has yet to me made clear what exactly this indemnifies me against.

Resurrecting an older thread but.....

I have heard of this before, indemnity insurance being offered on sale of flats were management has failed.

Does anyone know what this ACTUALLY insures against, because, from the earlier discussions, it is clear the situation is bad and requires lots of work by lessees to resolve.

Is it simply money for old rope for the insurance company (it appears to be) or does it do something that could potentially be useful (like pay for legal fees to resurrent company?)

[Richard Webster]

The indemnity insurance will vary a bit, but I understand it pays out the loss in value if the property is devalued because needed repairs etc are not actually carried out because the lease arrangements are not adequate to enable enforcement.

So, if there is a management company that is actually doing the maintenance, but has no legal obligation to do so, and stops doing it, or access is required through a flat or flats for some work to be done, and the lessees refuse to give access because they say they are not obliged to give access as the management company has no legal standing, then the difference in values will be paid. There are lots of differing factual situations, but the key is that there is something in the legal set up that means that the necessary rights and obligations do not exist.

I imagine an insurer would require that efforts be made to deal with the problem by negotiation and only then would they pay out.

If the rights etc do exist, but someone is refusing to comply then court action might be needed to resolve the problem. This would be the case with a satisfactory leasehold scheme so I doubt if the insurers would pay out in that eventuality.

Also valuing a flat in a block in severe disrepair and with possibly obstructive neighbours could be very difficult and you might not be happy with the insurer's view of the loss. If you sold it at an auction at a knock down price, they might say you could have done better.

This palaver of trying to sell etc would take a long time and is not really to be recommended. I don't think the insurance pays out any "fear" loss in value, i.e. the difference between the value of the flat with no legal problems and that with them, but no actual lack of maintenance etc. That is a much more likely scenario in the future in most cases.

The policies only tend to last for 25 years and the better ones are transferable in that period, but only if there are no matters on a buyer's survey that are not dealt with prior to sale. Not all lenders will accept these policies, so proceeding to buy in reliance on them can be risky.

[coppers]

I own an apartment within a block of approx 20 apartments which I have let. Some time ago the current management company made contact to say ---

"Following the liquidation of xxx properties who previously held the freehold title to xxx apartment block, the freehold title is now vested within the crown.

It is normal policy of the Crown to look to transfer the Freehold interest to a new flat management company which some or all of the leaseholders would participate, they would be happy to carry this transfer out at a cost of £500, plus a contribution of £500 towards legal costs. A Ltd company would also need to be set up at a cost of approx £400.

Could you please notify us within 14 days if you like to exercise your right to particiapte in a new flat management company at the above costs."

I expressed an interest at the time and asked to be kept informed.

More recently I received correspondence from the same management company telling me that the treasury would be contacting me shortly to confirm the transfer of the freehold to them.

On contacting them they informed me that none of the lessees seemed interested in forming their own company so they're going to take it over.

What are the implications of this? I'm a landlord living abroad (I don't know any of the other apartment owners) with limited time to devote to anything less than a serious issue.

[Poppy]

Sounds like the defunct management company are going to form a new company. What a pity that your fellow lessees are not interested.

Would you be interested in owning part of the freehold along with the ex-members of the management company? I think this is what you should explore. Do you have a solicitor acting in your interests? Sounds like you need to act quickly.

[kikuyu]

Sounds like the defunct management company are going to form a new company. What a pity that your fellow lessees are not interested.

Would you be interested in owning part of the freehold along with the ex-members of the management company? I think this is what you should explore. Do you have a solicitor acting in your interests? Sounds like you need to act quickly.

The Crown will not sell the lessees the freehold. See my recent entry on the same subject under:

Leasehold property subject to escheat

http://www.landlordzone.co.uk/forums/showthread.php?t=18276

OP-Your entry is slightly confussing. Did the Treasury solicitors say:

1.You can set up a management company (RTM) and run the affairs of the block-i.e. repairs and maintenance?
or

2. That they could sell you, the lessees, the freehold interest of the property?

[kikuyu]

Just another thought.

If your former management company had gone into liquidation and the freehold had vested in the Crown, why was your previous management company writing to you telling you what to do?

It is the job of the Treasury Solicitors to write to you and point out what can be done.

I would closely look into this matter as all does not appear to be above board.

You can reseach for yourself on the net and there are endless articles covering what happens when a company goes into liquidation or is dissolved.
Good week-end reading!

[Octavia]

We own one of four flats in a building which also has 4 shops at street level. The building has been neglected for many years and is in very poor condition. The freehold was purchased for £6000 about 10 years ago. The freeholder carried out no maintenance whatsoever; the only work he did on the property was a structural survey to get planning permission to build 3 new flats on the roof (which he never did). He also took out a mortgage on the property from a company which according to their website specialises in clients with adverse credit situations or who are not eligible for conventional bank finance.

We want to gain control of the property and put proper management into place so that we can make improvements and carry out desperately needed maintenance. We started down the route of applying to the LVT for appointment of a manager, but have been told that we may be able to buy the freehold from the Crown instead.

However we are concerned about the likely costs of this.


How would the value of the freehold be determined? Would it be based at all on the purchase price 10 years ago and would the condition of the building and the amount of outstanding maintenance required have any bearing on the price we would be asked to pay?

Would we be required to pay off the mortgage on the property regardless of whether it bears any relation to the actual value of the freehold?

Would it be possible for us to carry out the purchase ourselves or would we need to seek legal advice? We would like to do as much of the legwork ourselves as possible in order to reduce the costs (which would leave us with more money to pay for the maintenance!).

[jeffrey]

The Crown is involved only if L:
a. as an individual, died leaving no personal representatives or beneficiaries winding-up his Estate; or
b. as a company, was dissolved/liquidated.

[sgclacy]

We own one of four flats in a building which also has 4 shops at street level. The building has been neglected for many years and is in very poor condition. The freehold was purchased for £6000 about 10 years ago. The freeholder carried out no maintenance whatsoever; the only work he did on the property was a structural survey to get planning permission to build 3 new flats on the roof (which he never did). He also took out a mortgage on the property from a company which according to their website specialises in clients with adverse credit situations or who are not eligible for conventional bank finance.

We want to gain control of the property and put proper management into place so that we can make improvements and carry out desperately needed maintenance. We started down the route of applying to the LVT for appointment of a manager, but have been told that we may be able to buy the freehold from the Crown instead.

However we are concerned about the likely costs of this.


How would the value of the freehold be determined? Would it be based at all on the purchase price 10 years ago and would the condition of the building and the amount of outstanding maintenance required have any bearing on the price we would be asked to pay?

Would we be required to pay off the mortgage on the property regardless of whether it bears any relation to the actual value of the freehold?

Would it be possible for us to carry out the purchase ourselves or would we need to seek legal advice? We would like to do as much of the legwork ourselves as possible in order to reduce the costs (which would leave us with more money to pay for the maintenance!).




The sort of figure you might have to pay is set out on the Govt Web Site

http://www.bonavacantia.gov.uk/output/BVC6F-Tenants-for-the-Sale-of-Residential-Freehold-Property-subject-to-leases.aspx


18. In the case of the sale of a leasehold house where the house is worth less than £250,000, or in the case of flats where the value of each flat in the building is worth less than £250,000 and all the flats are leasehold, with leases having at least 80 years left to run before they expire, the price (subject to contract) is 15 times the total of the annual ground rents (whether or not such rent is actually being paid), or £1,000, whichever is the higher.

19. In all other cases we will have to obtain the advice of the District Valuer on both the price and the most appropriate method of sale. Before we will instruct the District Valuer you must send to us a cheque drawn in favour of “The Treasury Solicitor” in the sum of £500, or your solicitor must provide us with his undertaking to pay our costs of instructing the District Valuer to prepare a valuation.

You would not have to pay off the existing mortgage, if it is in negative equity the lender will suffer the shortfall

In view of the background surrounding the property you should instruct a solicitor to act for you

[Octavia]

The Crown is involved only if L:
a. as an individual, died leaving no personal representatives or beneficiaries winding-up his Estate; or
b. as a company, was dissolved/liquidated.

Sorry, I forgot to mention that key bit of information -- the company was dissolved in May 2009.

[Octavia]

The sort of figure you might have to pay is set out on the Govt Web Site

http://www.bonavacantia.gov.uk/output/BVC6F-Tenants-for-the-Sale-of-Residential-Freehold-Property-subject-to-leases.aspx


18. In the case of the sale of a leasehold house where the house is worth less than £250,000, or in the case of flats where the value of each flat in the building is worth less than £250,000 and all the flats are leasehold, with leases having at least 80 years left to run before they expire, the price (subject to contract) is 15 times the total of the annual ground rents (whether or not such rent is actually being paid), or £1,000, whichever is the higher.

19. In all other cases we will have to obtain the advice of the District Valuer on both the price and the most appropriate method of sale. Before we will instruct the District Valuer you must send to us a cheque drawn in favour of “The Treasury Solicitor” in the sum of £500, or your solicitor must provide us with his undertaking to pay our costs of instructing the District Valuer to prepare a valuation.

You would not have to pay off the existing mortgage, if it is in negative equity the lender will suffer the shortfall

In view of the background surrounding the property you should instruct a solicitor to act for you

Thanks, that sounds promising. None of the flats are worth more than £250k and although two of them have short leases I think they might still be over 80 years.

[Poppy]

Definitely key information that the freeholding company has been dissolved. What happened? Why was the company dissolved? Are people not paying their service charge?

Any mortgage/legal charge remains the responsibility of the borrower/freeholder.

Do the shops consist of twenty-five per cent or less of the floor area of the building?

It is definitely advisable to use a solicitor to collectively enfranchise your building.

[jeffrey]

Thanks, that sounds promising. None of the flats are worth more than £250k and although two of them have short leases I think they might still be over 80 years.
To verify this for £4, you can download from LR Online a copy of the registered title for the freehold reversion; this discloses lease dates/lengths, in its Schedule of Notices of Leases.

[Octavia]

Definitely key information that the freeholding company has been dissolved. What happened? Why was the company dissolved? Are people not paying their service charge?

Any mortgage/legal charge remains the responsibility of the borrower/freeholder.

Do the shops consist of twenty-five per cent or less of the floor area of the building?

It is definitely advisable to use a solicitor to collectively enfranchise your building.

I don't know the details of why the company was dissolved but my guess is that it was general mismanagement and financial incompetence. The freeholder owned a number of different companies all involved in property and owned most of the freeholds on our High Street. His office closed shop overnight and all of his companies were dissolved.

We have not been charged for rent, service charges or management fees for about 5 years.

[Octavia]

To verify this for £4, you can download from LR Online a copy of the registered title for the freehold reversion; this discloses lease dates/lengths, in its Schedule of Notices of Leases.

OK, I have done this and two of the flats have leases with 63 years remaining. The other two (including ours) have 100+ yrs remaining.

[jeffrey]

So the leaseholders of the shorter terms should pay a balancing amount to even-up the position with those of the longer terms.

[Octavia]

So the leaseholders of the shorter terms should pay a balancing amount to even-up the position with those of the longer terms.

Who would this be paid to? Would they need to pay it even if they weren't interested in buying the freehold themselves?

[jeffrey]

No. What I meant is simply that a collective purchase by all four should not be paid-for equally; the shorter-lease owners ought to pay more than the longer-lease owners (but I cannot give a meaningful split; it could be 2 @20% and 2 @ 30%, or it could be something else).

[Moderator1]

Several threads on the same topic have been merged here.

[jeffrey]

No. What I meant is simply that a collective purchase by all four should not be paid-for equally; the shorter-lease owners ought to pay more than the longer-lease owners (but I cannot give a meaningful split; it could be 2 @20% and 2 @ 30%, or it could be something else).
The same applies to lease extension, if the lessee does not participate in collective enfranchisement (or if the latter procedure never proceeds at all).
A shorter-lease owner owns less value so has more to pay in by way of equality.

[Octavia]

Definitely key information that the freeholding company has been dissolved. What happened? Why was the company dissolved? Are people not paying their service charge?

Any mortgage/legal charge remains the responsibility of the borrower/freeholder.

Do the shops consist of twenty-five per cent or less of the floor area of the building?

It is definitely advisable to use a solicitor to collectively enfranchise your building.

The shops consist of 33% of the floor area of the building. Would we still be eligible for a collective purchase of the freehold?

[jeffrey]

No [s.4(1)(b) of 1993 Act] but you could still negotiate a non-statutory purchase from Crown.

[Poppy]

I suspected that question was useful. When the answer came back at thirty-three per cent, I wasn’t sure how to say you’re not entitled to collectively enfranchise. I do suspect that a freehold purchase can be made informally with the Crown. You need to ask old Lizzie Windsor.

[Octavia]

Thanks -- if the Crown agrees to purchase of the freehold is the procedure going to be roughly the same? As I said there are 4 flats in the building and I expect 3 of us are going to be interested in purchasing (the fourth flat is owned by a company which has gone into administration). The other two flats are the ones with a short lease so it's in their interest to buy a share of the freehold rather than pay considerably more to extend their leases. The main thing we're concerned about is that one of the other flat-owners would like to manage the building himself and we're not sure he's competent or qualified! We would rather have a professional management company in charge as there are long-standing maintenance and repair issues.

[Poppy]

The purchase is a matter for the informal, non-statutory negotiating parties to decide.

If/when the lessees buy the freehold they must decide how to arrive at decisions and how to manage the building on an ongoing basis.

[Octavia]

Thanks and I apologise for asking so many questions but I want to be as well informed as possible before speaking to the other lessees. There is one other issue, which is whether the mortgagee has to agree to the sale? We have approached them numerous times over the past six months asking what they intend to do with the freehold and they have not replied. Can the Crown force the sale even if the mortgagee is non-responsive?

[Poppy]

I doubt the ex-mortgagee can prevent a sale - their borrower no longer exists. If you have contacted them previously and for whatever reason they have not so far chosen to respond, that's their problem. They'll soon know when your solicitor gets going with the purchase.

[b3anz]

Hello all,

just found this site and wandered if someone could advise me on a similar issue. Sorry if this has been covered but I cant seem to find a specific answer to my query. here goes....

I currently own a flat within a large block of flats (80ish flats) in leeds. The management company are due to be struck off companies house for reasons I wont bore you with. Obviously once it is struck off the freehold will pass to the crown. At present the residents committee are running the maintenance side of things and are do to apply for a RTM. Once this is in place can I as an individual flat owner obtain the freehold from the crown? If it can be obtained then what would be my responsibilities as the freeholder if the committee is running the maintenance and collecting the service charge? Within the lease is a statement which is headed "services for the estate". This goes on to state that "The company convenants as a separate covenant with the Lessor and Lessee that the company shall at all times" it then goes onto state the responsibilities of the management company. Does this mean the freeholder and company are two separate entities and that the resposibilities are totally separate.... Sorry if its a daft question but the legal jargon in the lease is a little hard to read.

Any advise would be greatly appreciated.:)

[thevaliant]

The management company are normally in place to run the maintenance of the flats. It may (or may not), also hold the freehold.

Firstly - The management company being struck off is not a good idea. Try and get that stopped if you can.
Secondly, you need to know what the management company was supposed to do, whether it held the freehold and who owns this management company.

You need to read your lease and consider the following:
Who owns the freehold? It is they who are responsible for the building maintenance normally, unless it has been delegated via the lease to:
The management company.

The residents association are often just a way of residents getting together to challenge what the management company is or is not doing. It normally has no legal standing so beware.

[jeffrey]

b3anz: the Crown is normally quite willing to sell the f/r to leaseholders with statutory rights of collective enfranchisement. Why waste time and money on RTM, in the circumstances? Proceed direct to RTE.

[b3anz]

thanks for the prompt reply folks, the management company was in place to maintain the building and collect the service charge and ground rent. The freehold is in the name of the management company and each lease holder has a share of the management company. The residents committee has taken over the running of the building due to the fact that the directors of the company have literally run off. I was looking into the possibility of obtaining the freehold as an investment. Considering the ground rent used to be approx £12 per month per flat I thought it was possibly a good investment. I wanted to know if or what responsibilities I would have as the freeholder if the committee were to continue to run the day to day maintenance or alternatively have a new management company take over from the residents. What do you think?

[jeffrey]

You yourself would alone not have any RTE rights. The Crown would not be wiling to sell to you unless at full market value.
However, the sale of f/r would not change anything in the lease. Also, new f/r owner could voluntarily allow Residents' Committee to run things, by;
a. statutory RTM mechanism;
b. non-statutory but formal appointment in a Deed;
c. non-statutory informal appointment; or
d. granting a reversionary lease, interposed between f/r and each flat's existing lease.

[thevaliant]

If the existing management company is:
1. The freeholder
2. Also responsible for the building maintenance
3. Owned by the flat lessees, then

You already have RTE! DON'T LET THE COMPANY DIE!

I realise that may be hard, but call a general meeting of the company (as shareholders you can get that together). FIRE the existing directors, appoint new ones, inform the bank, get whatever documents Companies House require filed ASAP.

You don't need a new company or to acquire the freehold. The problem is the existing company. Just because the 'directors' have run off, doesn't mean the company vanishes with it.

Get the existing company issues resolved THIS WEEK, and move on from there. Get knocking on doors.

[b3anz]

If the existing management company is:
1. The freeholder
2. Also responsible for the building maintenance
3. Owned by the flat lessees, then

You already have RTE! DON'T LET THE COMPANY DIE!

I realise that may be hard, but call a general meeting of the company (as shareholders you can get that together). FIRE the existing directors, appoint new ones, inform the bank, get whatever documents Companies House require filed ASAP.

You don't need a new company or to acquire the freehold. The problem is the existing company. Just because the 'directors' have run off, doesn't mean the company vanishes with it.

Get the existing company issues resolved THIS WEEK, and move on from there. Get knocking on doors.

This isnt an option im afraid as the directors have fleeced the company out of all the sinking fund and service charge and are currently on the run from the fraud squad, taking over the company will merely lumber the residents with their debts. The investigating officer has postponed stricking off the company pending the investigation so it will be held in limbo for as long as they want.

[thevaliant]

This isnt an option im afraid as the directors have fleeced the company out of all the sinking fund and service charge and are currently on the run from the fraud squad, taking over the company will merely lumber the residents with their debts. The investigating officer has postponed stricking off the company pending the investigation so it will be held in limbo for as long as they want.

Then you have problems anyway:

1. You cannot buy something that someone can't sell. As present Old Management Company holds the land (Oldco) and striking off has been disputed. Until it is struck off, you cannot buy land off Crown as they can't sell it.

2. Even if Oldco is eventually removed you then need to:
a) Setup New Management Company (Newco)
b) Have Newco buy land from Crown
c) IF NECESSARY, all leases need to be varied/surrendered & regranted to include Newco as management company to perform maintenance.

I would look carefully at this. I am not sure leaving Oldco to whither is a good idea. It may take years if investigation by government is underway and indeed, no maintenance can be legally performed during this time.

Even if resolution is swift, if leases covenant with OLDCO and ONLY Oldco to perform maintenance work, then Newco could not enforce maintenance service charge unless all leases altered. Given you have 80 flats, what's the betting someone won't agree to alter lease (as you need 100% agreement here)?

[jeffrey]

Alternative: apply to Court for a Vesting Order [s.26 of 1993 Act].

[b3anz]

I can have the old company struck off if I wanted, The copper in charge thought it would be better to hold it in limbo for the moment until I can figure out the best course of action, it can be struck off anytime, it just takes a phone call, then I can barter with the crown for the freehold. there is no covenant with the old company in the lease so the maintenance contract is up for grabs once the freehold is in our possession. Any ideas and thanks for your advise.