Does a freehold invalidate the terms of a leasehold?

Does a freehold invalidate the terms of a leasehold?

9:51 AM, 7th June 2024, About A week ago 42

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Hi, two years ago I bought a flat within an Victorian building with several apartments. At the time of my purchase, my flat was leasehold. The cost of building management including service charged was apportioned by percentage, i.e square footage apportionment and I am the smallest apartment.

For example, when I bought the flat the service charge breakdown for a year being £700 for my apartment and £1400 for the larger apartments.

Six months ago, the residents collectively purchased the freehold due to unresolved issues with the previous leaseholder. We are now freeholders under a registered company. However, the directors no longer wish to follow the square footage apportionment method.

My question is: According to the lease, costs are apportioned by square footage. Does transitioning from leasehold to freehold invalidate the lease terms? Are the lease terms no longer valid because 6 of the 9 directors have voted in favor of an equal split of costs, and they are considering this the final decision?

Any help would be appreciated,

Wilde


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Comments

Graham Bowcock

10:18 AM, 7th June 2024, About A week ago

It is unlikely that the leases have disappeared due to the purchase of the freehold. Therefore the lease clauses will still hold.

As ever, though, you should perhaps review with your lawyer precisely what transactions have taken place.

Kizzie

10:43 AM, 7th June 2024, About A week ago

You are each leaseholders with share of freehold interest in the resident owned management company. This company must be limited liability registered at Companies House and HMRC.
You need the company Memorandum & Articles to see your voting rights.
You wear two hats: one as shareholder with obligations under M&A and separate hat your obligations under provisions of your lease which do not vary.

JB

11:22 AM, 7th June 2024, About A week ago

In my opinion, the lease should prevail unless you've agreed to change it and solicitors have updated it. These are the conditions under which you purchased the flat.
I had a similar situation where a levy has been split equally when I should have paid a smaller proportion as my lease says I pay a smaller percentage of the service charge. It was argued, wrongly in my opinion, that the levy was different from the service charge!

BP Surrey

11:27 AM, 7th June 2024, About A week ago

Reply to the comment left by JB at 07/06/2024 - 11:22
I agree, the lease is "KING" and the freeholders are not able to change the terms of your lease without your approval and should you agree, your solicitor should draw up a Deed of Variation to the Lease which they would register at the Land Registry. Clearly you should not agree.

Judith Wordsworth

11:46 AM, 7th June 2024, About A week ago

Your terms under the Lease stand unless and until ALL or possibly a majority (would need to be agreed at an AGM or EGM) decide to go equal shares on service charges/maintenance. Same as not collecting the ground rent ( one of the perks of leaseholders also being joint freeholders)

Simon Lever - Chartered Accountant helping clients get the best returns from their properties

12:21 PM, 7th June 2024, About 7 days ago

The lease is a legal contract between the freeholder and the leaseholder.
The terms of the contract cannot be changed unless both parties to the contract agree. As this is to do with land I beleive any change has to be in writing and possibly as a deed. (Solicitors on this site can advise the correct details).
It does not matter if the freeholder changes as they would have to agree to honor any exisiting contract terms.
The problem is that you are a shareholder, and possibly a director, of the company that owns the freehold. This gives you an iron in both fires and could make things difficult with your neighbours if you insist on not paying what they think is a reasonable contribution to the total service charge.
It is best to take legal advice just to make sure.

NewYorkie

13:02 PM, 7th June 2024, About 7 days ago

Do the 6 who have voted for the change own larger properties which previously had higher service charges than the other 3?

JB

13:20 PM, 7th June 2024, About 7 days ago

Reply to the comment left by NewYorkie at 07/06/2024 - 13:02
'The terms of the contract cannot be changed unless both parties to the contract agree'
This introduces an interesting point. I own 100% of a freehold where one of the leaseholders has requested a decrease in his share of the service charge as he has a very small studio flat which has its own entrance and a lot of the service charge is spent on fire precautions for the communal entrance. If I agree, the other leaseholders will have to pay more so I think ALL the leaseholders, regardless of whether they own a share if freehold, need to agree. What do other people think?

Kizzie

13:39 PM, 7th June 2024, About 7 days ago

You own the freehold interest and granted the leases. Your leaseholders do not own a share of the freehold and do not have a vote.
It depends on how you as freeholder apportioned the service charge which must obv total 100% and whether the FTT would consider reasonable

havens havens

14:18 PM, 7th June 2024, About 7 days ago

Switching from leasehold to freehold ownership doesn’t cancel your lease terms, including how service charges are split. Your lease is still a binding contract. The other owners can't just change the cost split without everyone's agreement. You should talk to a property solicitor to see what you can do next.

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