Can a freeholder stop companies purchasing flats?

by Readers Question

8:38 AM, 14th March 2018
About 7 months ago

Can a freeholder stop companies purchasing flats?

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Can a freeholder stop companies purchasing flats?

I hope someone here can help me. Myself and a few owners purchased the freehold of our block of flats (27 in total) and formed a freehold company.

We have seen in recent months the purchase of flats by a company who basically rents the flats for maximum profit, not caring who is in there or the effect it has on other residents.

My question is as freeholders can we stop the sale of flats to said company?

Regards

Rich



Comments

Neil Patterson

8:40 AM, 14th March 2018
About 7 months ago

Hi Rich,

It is quite common for lease contracts to have clauses and conditions regarding subletting.

Ian Narbeth

10:20 AM, 14th March 2018
About 7 months ago

You write: " ... as freeholders can we stop the sale of flats to said company?"
Depending on the terms of the leases, probably not. There may be additional provisions because the buyer is a company but generally landlords cannot object to sales of flats.

However, because you are the landlord of the company you can enforce the terms of the lease including covenants relating to sub-letting, not disturbing the neighbours, not using for illegal or immoral use, using as a single private dwelling etc.

If and when you have any problems I suggest you get some professional advice.

Paul Mullally

10:34 AM, 14th March 2018
About 7 months ago

I would check your Title deeds and Lease agreements to see if there is a clause to prevent the same person owing more that 2 two properties in the same Freehold development.

I know a couple of the developments I own property in contain that clause. One of them didn't enforce it (I now own 3) and the other mentioned it albeit we're collectively trying to buy that Freehold ourselves.

Ian Narbeth

10:38 AM, 14th March 2018
About 7 months ago

Reply to the comment left by Paul Mullally at 14/03/2018 - 10:34
Good point Paul. I haven't come across that type of clause. If it is used it had better be well-drafted to capture connected persons or else the "bad guys" simply form a new SPV subsidiary for each flat.

Graham Bowcock

8:23 AM, 15th March 2018
About 6 months ago

Dear Rich
You can only limit buyers in accordance with the leases. Some do say "no letting" and others I have seen limit occupation to the owner and their family.
The freeholder or management company cannot unilaterally impose restrictions on purchasers.
If the residents and owners generally think there is a problem then you could seek agreement to vary the terms of the leases; you will need everyone to agree and it would have to be documented legally. Some may disagree though if they think it will affect their ability to sell their property.

Graham

Ian Narbeth

10:43 AM, 15th March 2018
About 6 months ago

Reply to the comment left by Graham Bowcock at 15/03/2018 - 08:23
It is probably a nonstarter to vary the leases as those wishing to sell may want to keep their options open to sell to the "bad guys" and once they have bought, the bad guys won't co-operate.

Puzzler

13:49 PM, 17th March 2018
About 6 months ago

Reply to the comment left by Ian Narbeth at 14/03/2018 - 10:38
I think...that to be a qualifying leaseholder you have to be a "natural person". Owning three flats also disqualifies you from being one in terms of enfranchisement under the statute.

Ian Narbeth

10:39 AM, 19th March 2018
About 6 months ago

Reply to the comment left by Puzzler at 17/03/2018 - 13:49
Puzzler, that's not quite right. The question is not about freehold enfranchisement but whether the freeholder can prevent a flat being sold to a company.

Regarding freehold enfranchisement, there used to be a residence test but this was abolished by the Commonhold and Leasehold Reform Act 2002 and there is now a requirement that qualifying tenants must have been registered as owners of their flat for at least two years.

You are right that owning three flats will disqualify a tenant from acquiring the freehold but that also applies to natural persons. NB owning three or more flats does not prevent tenant from getting lease extensions.


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