Buying share of Freehold as an investment

My girlfriend ha sthe opportunity of buying a share of the Freehold of her building but she doesn't have the money right now. She is also thinking of selling so the Freehold would add obvious value. I'm thinking of buying on her behalf but what are the rules around reselling? If I wanted to resell it at a profit (either to the other Leaseholders or to the new Leaseholder) would I be able to do that?

Thanks

Jeremy,

The rules on reselling a share in the freehold company (assuming a company is used as the vehicle for purchasing the freehold title) depend on how the freehold is acquired. Normally, a company will be set up and the company's paperwork will provide that, upon the sale of any flat in the block, the flat-owner's share in the freehold MUST also be sold at the same time. However, if the company is not formed properly it may not provide for this obligation.

If the company's paperwork does not provide for these circumstances, in theory you could keep the share after the flat is sold, albeit against the wishes of the remaining flat owners.

May I suggest you make contact with the person who is leading the freehold purchase transaction and ask them what the company's "Articles of Association" say on this point. An enquiry may need to be made to the solicitor who is instructed.

The main reason why leaseholders buy a share in the freehold is so they can then extend the term of their leases normally to 999 years. Another advantage is taking over mangement of the block. Buying a share in the freehold can be seen as an investment, as the cost is normally recovered upon the sale of the flat. However, most people buying a share in their freehold would not see buying a share as a profit making exercise.

Without knowing the individual circumstances and likely costs involved, I cannot say whether your girlfriend or you should buy the share in the freehold but, from experience, it is usually advised to join in and buy the share in the freehold, not least because the overall legal and surveyors costs will be diluted the more people participate.

I hope this answers your question.

Tom Merralls
TJM Law

www.tjmlaw.co.uk