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Buying shares in Resident freehold company

I'm a leaseholder in a block of 7 flats, looking buy shares in the freehold.

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I bought our leasehold flat in the 80's in a block of 7 flats.
The freehold was bought for £60,000 by four of the leaseholders by setting up a Company limited by shares in 2007. Leaseholder Directors manage the freehold themselves.

I wish to buy the 20 shares in the company (provisioned for me) in order to extend my lease to 999 years. It is currently sitting at 63 years.

I checked with Company House for the Freehold Company documentation. I'm no expert, but there seem to be some inconsistencies.

The Articles of Association state that the Company share capital is total of 140 ordinary shares, £1 each. Each leaseholder can own a maximum of 20 shares in the company. (20 shares x 7 = 140 shares.)

A few years after the Company bought the freehold, the founding Secretary (solicitor) was tragically killed in a motor accident. Thereafter the Directors shareholdings changed.
Another leaseholder bought their 20 shares in the freehold company, bringing the total number of leaseholders in the company to 5.
The remaining unallotted 40 shares (2 flats) were then split amongst the Directors including founding Secretary (then executors). This exceeded their maximum 20 shares.
The following year when the founding Secretary's flat was sold, his additional ordinary shares were removed leaving the allotted 20 shares, which were sold with the flat.
There were no resolutions nor changes to the M of A of A with Company House.

Years later, two of the Director leaseholders sold their flats together with 20 shares. However, they retained the split-up additional ordinary shares which were allocated to another leaseholder and me.

My 20 shares are split between two ex-Directors (8 & 6) and one current (6).

The Director (neighbour) I'm dealing with is being helpful. However, he only moved in last year, and he only has few years of electronic records.(No paper records.) I thought the statutory requirement for keeping documentation is at least ten years?

I believe the premium I would pay goes to the shareholders.

My questions are:
Does the share allotment look correct?
What would be the fair cost for me to buy my 20 shares?

Replies (11)

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RLI
By lionofludesch
23rd May 2020 13:48

It doesn't look right to me.

But then, I'm not a solicitor.

Which is what you need.

Thanks (1)
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By Flat Man
23rd May 2020 14:08

lionofludesch hi,

What do think doesn't look right?

I was advised that this is an accountancy issue.

Thanks (0)
Replying to Flat Man:
RLI
By lionofludesch
23rd May 2020 14:37

Flat Man wrote:

lionofludesch hi,

What do think doesn't look right?

I was advised that this is an accountancy issue.

"The remaining unallotted 40 shares (2 flats) were then split amongst the Directors including founding Secretary (then executors). This exceeded their maximum 20 shares."

Nothing "accountancy" about the above. The Articles have been breached.

Thanks (0)
Replying to Flat Man:
Flag of the Soviet Union
By thevaliant
24th May 2020 18:54

It is NOT an accountancy issue.

It is a leasehold issue. You need a solicitor. And ideally you need a solicitor who is knowledgeable in leasehold and company affairs.

I used to own a flat for eight LONG years, and became VERY good at leasehold law (forced to be).

The situation you describe is a mess. Companies used to buy the freehold which are then 'owned' by the lessees owning the shares should NEVER [1] be limited by shares, because of the situation you described. They should be limited by guarantee.

You need a solicitor. To be fair, the COMPANY needs a solicitor. This sounds like a disaster unfolding for everyone [2].

[1] I don't mean NEVER as in its illegal, I mean NEVER as it is pretty much the stupidist thing that you can do in leasehold matters except maybe allow forfeiture to occur.

[2] What usually happens in disasters like this is (say) you have four flats, a freehold company, and the four flat leases have a share each. Then when one flat sells, they also sell the share at the same time. Guess what? Boneheaded conveyance solicitors would assign the lease, but forget the shares. Twenty years later, a more competent solicitor raises the fact that Persons P, Q, R and S own the four leases, but person A, B, C and D still legally own the shares. Trying to undo that mess is a £10k problem coming down the line......

Thanks (1)
By Tim Vane
23rd May 2020 16:00

You need a solicitor. If your solicitor told you it was an accountancy issue, you need a new solicitor. Also, the fair cost is irrelevant. As with anything you will need to pay the company owners the amount they want, not the amount you want. Unless the articles say different (see my first sentence).

Thanks (0)
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By Flat Man
30th May 2020 15:07

Thank you for all the responses!

How does one calculate the premium to buy into the freehold ie allocated 20 shares? Then increase lease period etc.

I'm trying to get to an amicable solution and Directors are also keen to resolve the premium calculation.
The Director /neighbours taking advice from the advisory websites state a valuation of my flat would be the answer. However that would give a premium of £50k. I'm not selling so that's not an option. Any other options would be appreciated.
Cheers

Thanks (0)
Replying to Flat Man:
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By Matrix
30th May 2020 15:24

The Director /neighbours taking advice from the advisory websites

[/quote]

What are the advisory websites? Do you mean gov.uk or free websites like this one where other mugs give their hard earned professional knowledge away for free? If you know any property or legal ones then please would you post as these would be invaluable for my clients.

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Replying to Matrix:
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By Flat Man
30th May 2020 16:05

Hello Matrix,

Correct and https://www.lease-advice.org where professionals provide voluntary advice. Most Professionals in any sector give some voluntary advice because most like to help others.
I think it's unfair to call fellow contributors mugs.

Any advice on the question posted will be appreciated.

Thanks (0)
Replying to Flat Man:
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By WhichTyler
01st Jun 2020 11:36

The advice on that site of 'It is advisable to obtain a valuation from a qualified surveyor who specialises in this area.' and 'You should not take any action in reliance on the estimate without seeking formal advice from a surveyor, property lawyer or other qualified professional first.' seems good to me.

Thanks (0)
Replying to Flat Man:
RLI
By lionofludesch
30th May 2020 15:34

Flat Man wrote:

Thank you for all the responses!

How does one calculate the premium to buy into the freehold ie allocated 20 shares? Then increase lease period etc.

I'm trying to get to an amicable solution and Directors are also keen to resolve the premium calculation.
The Director /neighbours taking advice from the advisory websites state a valuation of my flat would be the answer. However that would give a premium of £50k. I'm not selling so that's not an option. Any other options would be appreciated.
Cheers

It's a price that you're prepared to pay and they're willing to accept.

You can't calculate it.

You need to make an offer and work towards each other. If you can't agree a price, the deal's off.

Thanks (0)
Replying to lionofludesch:
Flag of the Soviet Union
By thevaliant
01st Jun 2020 11:26

That isn't quite true.

There is the ability to force a statutory 90 year lease extension at peppercorn rent, and their are calculators online to do this (as it IS a fixed price).

But OP - If you're already asking at LEASE, then please stop asking here. It's far better than this website where we know next to nothing about lease extensions and share issues around freehold companies.

Alternatively, try 'LandlordZone - long leasehold forum' but I think the quality of the posters there has gone down A LOT in recent years. You used to get solicitors on that site, but now its mostly lay people offering (sometimes wrong and poor) advice.

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