Sale of Share of Freehold Flat

[normancp]

I own a flat in a block of five and we all own a share in the Freehold. The Freehold is owned by a Limited company of which we are all Directors and each hold one share per flat. Recntly one of the owners sold their flat with its share in the Freehold and has now asked the Company to repay his loan to the Company for the original purchase of the Freehold. The Company Accounts express the monies used for the original purchase of the Freehold as 'loans from shareholders to enable the company to acquire the freehold'and he is trying to exploit this to obtain a refund of his original costs for purchasing his share in the Freehold. We do not feel that this is fair as he has already sold his share to the new owner and has received a higher value for the property as a result. Can he really have his cake and eat it?

[leaseholdanswers]

It depends on what terms the loans were made, what your minutes or resolutions said about them at the time, and what your articles say.

Did you extend your leases, if so then the majority of that loan has been repaid by the conversion of the asset to a longer lease for an individual, as the value has been taken out. The remainder would reflect the right to sell other leases ground rent income and any development rights.

Sale of the flat and the share in the company can be a way to deal with the loan but in the absence of context, as above, they could argue that they can have their cake and eat it.

Pull out the above documents and see.

[Gordon999]

Often in companies holding the freehold of a block of flats, there will be a clause in the "Articles of Association" to say members must be leaseholders in the block. So after the sale of flat, the share in the freehold company must be transferred to next flat owner.