Freehold company shares

[charlieking16]

Hello

Posting here as imagine others have had similar issues. I own a leasehold flat and, along with the six other leaseholders in the block, we are about to exercise our right to buy the freehold. We will form a company to do so, and I have a question as to the shares of that company.

I own the largest flat, and pay 19% of service costs, whereas everyone else pays 13.5%. Should we establish the freehold company on the same basis, with me owning 19 shares out of 100, or should we just issue one share per flat? Does it make any practical difference? I'll be asking the solicitor but before we engage them, trying to gather as much info as possible, so any advice appreciated!

Many thanks all

Charlie

[nxjen]

Are you paying a greater share of the freehold purchase price or are you each paying seven equal amounts? Perhaps the share issue would reflect the proportion that each leaseholder pays.

[Dulwich61]

Charlie

I've a number of freehold flat shareholds. Allocate one corporate share per flat, then sort out the service charges between yourselves.

[charlieking16]

AH great, thanks, so just one share per flat regardless of flat size?

[charlieking16]

ThAnks nxjen, the issue is different lease lengths complicate the proportions we are paying....

[Sierapink]

Hey,

www.lease-advise.org can offer free advise and on enfranchisement matters via phone or email.

Good luck!

[rendelharris]

charlieking16 Wrote:

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> AH great, thanks, so just one share per flat

> regardless of flat size?

Yep one share in the company per flat, then when you set up the company in its Articles of Association you will agree on who pays what share of service charges, repairs etc.

[red devil]

Ditto. In the SoF I have each share is worth a nominal ?1, this forms part of the Freehold Company's assets in the annual accounts. The % service charge was based on what was stipulated in the original leases of the flats...

[worldwiser]

Set up your RTE company as limited by guarantee. That's what we did. No shares, all the rights and responsibilities of Flatowners are in the M&AofA of the company. Saves a truck load of paperwork.

[red devil]

worldwiser Wrote:

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> Saves a truck load of paperwork.

Such as?...

[worldwiser]

Um, issuing share certificates? And reissuing them every time there's a sale?

[red devil]

That's right, hardly 'a truck load of paperwork'. The OP is one of 7 flats, so we're not talking big numbers here. I'm a Director/Secretary of a SoF for 4 flats, and in the 8 years I've been doing it, I've reissued 2 share certs when there's been a change of owner.

Under the Guarantee model an owner selling has to resign in writing first, and the new owner will be accepted to the Company in writing. In comparison that sounds like 'a mountain of paperwork' to me...;-)

[charlieking16]

Thanks to all. Seems that one flat one share is the norm. My only question is how you then attribute a value to your freehold share as and when I come to sell? Or for that matter, were we ever to collectively sell the freehold (not that o can see why we would), how would you apportion the income from the sale?

Thanks again, advice much appreciated. Will look into ltd by guarantee also

[red devil]

There is only a nominal value in your share of the freehold, in the case of my flat it's ?1. By having a share of freehold it could be argued that the value of the property as a whole is increased and would be reflected in the sale price. For example flats with a share of freehold or long lease will cost more to buy than a flat on a short lease.

I would assume that as you would hold one of 7 equal shares in the freehold company, that if you were all to sell the freehold to an external freeholder, thus becoming leasehold again, you would each receive one seventh of the price paid for the freehold...

ETA: After re-reading your OP, this may not be the case as you are paying a higher % of service charge, therefore you may have to pay 19% of the freehold cost when you come to buy it, and similarly you would receive 19% of it's sale price if it was ever sold. It's these issues that your solicitor who writes up the Articles of Agreement needs to sort out...