Any Flats In London

[Will!]

While looking at flats in London, one issue that's struck me is that buying a flat leasehold really leaves you at the mercy of whoever owns the freehold. Does anybody know of any blocks of flats in London where the freehold is owned by a company made up of the leaseholders? Or even any blocks that are commonhold?

Cheers

Will

[dnjc]

there are loads, just look for flats with share of freehold indicated on rightmove.

[TeddyBear]

and it's not necessarily easier if you have share of freehold. I lived once in converted house, 5 flats where we had freehold. One of the flat owners never had money for the service charges, awkward to have to deal with this when it is your neighbour.

[cwk1977]

and it's not necessarily easier if you have share of freehold. I lived once in converted house, 5 flats where we had freehold. One of the flat owners never had money for the service charges, awkward to have to deal with this when it is your neighbour.

Yep, Share of Freeholds can be just as painful, it's a myth that they solve problems. If the OP has the budget for a Freehold then he should opt for one instead.

[Frenchie73]

It can be a problem to have a share of freehold if the group of shared land owners generally don't get along, or disagree about the services, the repair costs, the maintenance issues, to name a few examples.

If the building is rather large, with many shared land owners, that multiplies the possibility of the above examples.

Besides, it also means that this group of people has to draw their own shared agreement to set the rules. Some people just don't want the hassle.

It has benefits as well, but it's not always a bonus. It depends on the building & the people living there.

[Will!]

Thanks for all the replies and warnings! I was looking at a block of flats in Camberwell which was well maintained and looked like it had a good leaseholder-owned management company, but when I asked for a copy of the company's accounts I saw that it had *rapidly* increasing debts of its own and unsecured debts owed to it. I wonder how many people in that block have bought flats without looking at the accounts of the company they're buying into.

Cheers

Will

Edited October 11, 2010 by Will!

[sleepwello'nights]

Thanks for all the replies and warnings! I was looking at a block of flats in Camberwell which was well maintained and looked like it had a good leaseholder-owned management company, but when I asked for a copy of the company's accounts I saw that it had *rapidly* increasing debts of its own and unsecured debts owed to it. I wonder how many people in that block have bought flats without looking at the accounts of the company they're buying into.

The usual position is that the management company acts as a trustee for the leaseholders. It doesn't need to have any money of its own. Basically it collects service charges in advance and uses them to pay for the maintenance and upkeep of the building. If an owner doesn't or won't pay there are a number of ways it can obtain payment. Court summons, payment from the mortgagee (if a mortgage exists) or the right to obtain possession by applying to the Court for forfeiture of the owner's lease.

If the management company absconds with the leaseholders money then the leaseholders may have to pay again for the maintenance and upkeep of the building. As it's usual to pay 6 months in advance the loss shouldn't be that a large sum for each individual. The main safeguard is to ensure that all monies paid to the management company are held in a separate account from the management company. In the event that the management company becomes insolvent then any money held on trust for the leaseholders is not available to any creditor of the management company. The only creditors able to call on it would be those who provided goods or services to the owners.

[Will!]

I guess my worry if the management company went bust wouldn't be so much losing a load of money but who would manage the block. In the block of flats I was looking at it turned out that the management compnay didn't actually own the freehold but only a head lease which expired in 2071, with the freehold being owned by Southwark Borough Council. It occurred to me that it might be difficult to find a management company who would be willing to take on the block for only a few decades. Seems like nothing with flats is easy!

[jcpricewatcher]

Thanks for all the replies and warnings! I was looking at a block of flats in Camberwell which was well maintained and looked like it had a good leaseholder-owned management company, but when I asked for a copy of the company's accounts I saw that it had *rapidly* increasing debts of its own and unsecured debts owed to it. I wonder how many people in that block have bought flats without looking at the accounts of the company they're buying into.

Cheers

Will

I happen to live in a block which is share of freehold. Each year there is an agm, where we vote on whether to keep the management company etc. Also people can request things to be done or added, and these are then also voted on. The accounts are nicely in surplus, since we instruct the management company to set the service charges appropriately. Any non-payers are charged late payment fees, plus interest. If they still don't pay, eventually the arrears are obtained when they sell the property, or are repossessed (the management company can prevent the sale, thus are before the bank in terms of credit).

I appreciated not every block is like this, but they so exist!

When buying a place, your solicitor should be advising you (if they're any good) about any issues such as huge debts.

[jcpricewatcher]

I guess my worry if the management company went bust wouldn't be so much losing a load of money but who would manage the block. In the block of flats I was looking at it turned out that the management compnay didn't actually own the freehold but only a head lease which expired in 2071, with the freehold being owned by Southwark Borough Council. It occurred to me that it might be difficult to find a management company who would be willing to take on the block for only a few decades. Seems like nothing with flats is easy!

A management company would be easy to find, afterall, they charge a fee to manage a block, so there are many who would be more than happy to make a bid for the business!

[Will!]

One thing I like about this block of flats is that the management company prohibit sub-letting. This means that (i) as a buyer I'm not competing with would-be BTL landlords and (ii) all the vendors are owner-occupiers who are in general more motivated to sell than BTL landlords who market flats for sale while simultaneously letting them out. Too bad there aren't more blocks like this.

[thejaksie]

I live in a flat and I am currently buying share of freehold (in london)

the freehold company has a large fund for unexpected maintenance and has been on top of things for the past 5 years, great job really. The freehold was bought jointly by most of the flats in my building some years ago (as a result of increasing management fees and low service and quality from the previous freeholder). Especially the long term maintenance was neglected by the previous external freehold company (ie they did ad-hoc services rather than corrective structural maintenance).

As long as the freehold is run professionaly iit delivers a better value proposition than external management companies who see these contracts as a cash cow (these long term contracts are often sold to investment banks, which should tell you enough).

For example my current service charges are 1025 pounds p.a., a lot of comparable flats in non freehold flats in my area (ran by external management company) this is 2500- 3500 p.a.

It is important that you to do the research on the freehold company however, because contrary to a leashold you take on the obligation that accompanies owning shares in a company and vis-a-vis the leasholders. Look out for hidden debts and how much money in reserve etc!

ps my flat is for sale, if you're looking for a great share of freehold flat, let me know