Freehold Purchase:

Setting Up, Organising

And Arranging

The Freehold

Management Company

When organising a freehold purchase of your block (also known as leasehold or collective enfranchisement), it is worth bearing in mind that a nominee purchaser will need to be chosen. This purchaser is who is deemed responsible for the collective enfranchisement and will become the new freeholder on the block of flats. Fortunately, this doesn’t need to be just one person. The nominee purchaser can be a group or a limited company (or, in fact, any legal entity).

It is highly recommended that the group of leaseholders joining together to buy the freehold of their block form a limited company with equal shares, meaning that each participating leaseholder has an equal share in the final freehold which will be owned by the freehold management company. This is not required by law, but is by far the easiest and most transparent way to operate, with other models often leading to disaster. The other option is for one individual in the block to be named nominee purchaser, which is not an ideal situation for anyone — often even the person named nominee purchaser. This sort of system is open to potential problems and should be avoided, with the limited company option being highly recommended.

Forming a limited company can be straightforward but in this situation you’ll want to ensure it’s done properly and that everything is properly accounted for to ensure transparency and a minimum of potential future issues. Having a solicitor with plenty of experience of freehold purchase on board will help to guide you through this process. Essentially, the shareholders of the company (the participating leaseholders) will have equal shares and say in the running of the company with directors appointed to run the company itself. These directors should have no greater share, but simply be appointed to manage the company on behalf of the shareholders.

It is a legal requirement to hold an Annual General Meeting as well as to file certain pieces of paperwork each year, which is another reason why getting the right solicitor in the first place will be able to help ensure you don’t fall foul of any laws or legislation which could lead to the enfranchisement effort itself being scuppered. With so much at stake, you’ll want to make sure everything is being handled properly and without any potential for future issues. A freehold management company will require, for example, a special set of Memorandum and Articles of Association. It should also be clear that a freehold management company is not the same thing as a residents association [you may find that some leaseholders don’t live in the block and conversely some residents don’t own the long lease] and that the freehold management company exists solely for the purchase and ownership of the freehold of the building and no other purpose.

This last point is particularly pertinent as problems can often arise when leaseholders try to bring additional problems to the freehold management companies which are not its concern. This can delay and slow down the process and potentially even cause fractures which could derail the collective enfranchisement effort completely. This is why having the purpose and aims of the freehold management company and the collective enfranchisement effort itself stated from the start is so vital. Only by being completely clear and transparent can a successful collective enfranchisement effort be completed.

Getting the right legal representation through a specialist solicitor with a great deal of experience in collective enfranchisement from the outset will ensure your freehold management company is properly set up and structured, ensuring fairness and transparency as well as a clear aim moving forward. Having this sort of direction will ensure the success of the project and knowing that a solicitor has helped to sort out the legal aspects will often provide peace of mind for you and the other leaseholders in knowing that everything is being done properly, thereby lowering tensions and making for a far happier and potentially more successful freehold purchase.