Share of freehold - costs incurred without permission
Discussion
One of my friends lives in a flat which is an old converted house and is a shared freehold between the three flats. Relations with the other two owners are not great because they are absentee landlords and dont really care. My friend wanted to make some alterations to their flat which would have removed the chimney breast so they contacted the others and said thats what they would like to do and asked their opinions. On hearing this the other two owners spent quite a bit of money getting their own surveyors to look into the issue and now want my friend to pay a bill they did not agree to or know about until after the money was spent.
Would appreciate knowing what the legal position is on this in terms of having to pay costs that you didnt agree to in a situation like this
Would appreciate knowing what the legal position is on this in terms of having to pay costs that you didnt agree to in a situation like this
Your friend and the other two flat owners will almost certainly each own a lease of their flat. Each lease will contain various covenants (legally binding promises) with the owner(s) of the freehold.
A standard covenant is that any leaseholder wanting to carry out structural alterations must obtain the consent of the freeholder. Many leases also require the leaseholder to reimburse the freeholder in respect of any expense the freeholder incurs in considering such an application, whether consent is granted or not.
Although this may seem grossly unfair, it really isn't when one considers the history involved. Freeholds subject to long leases were traditionally (and still are to some extent) regarded as boring but safe investments, as they produced a guaranteed ground rent every year - an investment suitable for widows and orphans.
However, occasionally the freeholder would have to get involved in issues like proposed structural alterations, which could potentially affect the value of their investment. As the purpose of holding an investment is to receive income, not spend money, no freeholder would expect or be willing to incur the expense of surveyors etc to check that such proposals were safe and properly designed. The lease would therefore include suitable covenants to make the leaseholder responsible for all such expenses.
I suspect this is the situation here. Normally, where the freehold is shared between a very few people, such matters are dealt with sensibly and at minimum expense, if only because the other leaseholders might one day find themselves in the same position. But it seems that in this case the other two are treating it very formally.
Your friend therefore needs to read his lease carefully (or get someone who understands leases to do so for him) in order to find out exactly what his legal liabilities are, and whether he is, in fact, responsible for these expenses.
A standard covenant is that any leaseholder wanting to carry out structural alterations must obtain the consent of the freeholder. Many leases also require the leaseholder to reimburse the freeholder in respect of any expense the freeholder incurs in considering such an application, whether consent is granted or not.
Although this may seem grossly unfair, it really isn't when one considers the history involved. Freeholds subject to long leases were traditionally (and still are to some extent) regarded as boring but safe investments, as they produced a guaranteed ground rent every year - an investment suitable for widows and orphans.
However, occasionally the freeholder would have to get involved in issues like proposed structural alterations, which could potentially affect the value of their investment. As the purpose of holding an investment is to receive income, not spend money, no freeholder would expect or be willing to incur the expense of surveyors etc to check that such proposals were safe and properly designed. The lease would therefore include suitable covenants to make the leaseholder responsible for all such expenses.
I suspect this is the situation here. Normally, where the freehold is shared between a very few people, such matters are dealt with sensibly and at minimum expense, if only because the other leaseholders might one day find themselves in the same position. But it seems that in this case the other two are treating it very formally.
Your friend therefore needs to read his lease carefully (or get someone who understands leases to do so for him) in order to find out exactly what his legal liabilities are, and whether he is, in fact, responsible for these expenses.
That;s all very informative, but not really what the OP asked
The other 2 freeholders chose to spend some money on advice without consulting with or informing the OP and are now looking to be reimbursed by him. Personally I wouldn't think they have a leg to stand on. Others may know better.
The other 2 freeholders chose to spend some money on advice without consulting with or informing the OP and are now looking to be reimbursed by him. Personally I wouldn't think they have a leg to stand on. Others may know better.
martinbiz said:
That;s all very informative, but not really what the OP asked
The other 2 freeholders chose to spend some money on advice without consulting with or informing the OP and are now looking to be reimbursed by him. Personally I wouldn't think they have a leg to stand on. Others may know better.
The lease is a contract with the freeholder. If the lease says they (As freeholders rather than other leaseholders) can spend money to investigate an application and the leaseholder has to pay, then that's what they can do. The other 2 freeholders chose to spend some money on advice without consulting with or informing the OP and are now looking to be reimbursed by him. Personally I wouldn't think they have a leg to stand on. Others may know better.
As above need to check the covenants. I have a purpose built flat , mine specifically calls out alterations and altogether states no alterations are allowed. It doesn't specify what constitutes an alteration though, but I have taken it to be the structure of the building and loft as a minimum.
I'm sure if you asked them and they and the other flat agreed you may be still able to but you would not be able to ask those people to incur costs for letting you break the rules.
If there are no such rules again I think it's reasonable to pay for their costs. If the alteration could cause problems such as damp or loss of light or something like that it would impact the other properties.
I'm sure if you asked them and they and the other flat agreed you may be still able to but you would not be able to ask those people to incur costs for letting you break the rules.
If there are no such rules again I think it's reasonable to pay for their costs. If the alteration could cause problems such as damp or loss of light or something like that it would impact the other properties.
My suspicion is that this is going to come down to whether you expressed an interest in maybe doing the work, or more formally said you are going to remove the chimney breast and would like permission.
Having said that, if I would expect a formal application which would kick off permissions would include structural drawings and calculations etc.
Much as ever depends on wording within the lease, which we never ever get.
Having said that, if I would expect a formal application which would kick off permissions would include structural drawings and calculations etc.
Much as ever depends on wording within the lease, which we never ever get.
surveyor said:
My suspicion is that this is going to come down to whether you expressed an interest in maybe doing the work, or more formally said you are going to remove the chimney breast and would like permission.
Having said that, if I would expect a formal application which would kick off permissions would include structural drawings and calculations etc.
Much as ever depends on wording within the lease, which we never ever get.
Not being a lawyer or surveyor, if some one were to ask me 'i'm thinking of removing the chimney, what do you think' my response would be 'I'm fine in principle, but will need to get an independent survey done (for which i expect you to pay) to be sure it won't cause issues'. For them both to get independent surveys done seems a bit much, especially if this is still at the idea stage. If its at the i'd like to get he builder started next week stage, then i'm not surprised they got the survey done.Having said that, if I would expect a formal application which would kick off permissions would include structural drawings and calculations etc.
Much as ever depends on wording within the lease, which we never ever get.
surveyor said:
My suspicion is that this is going to come down to whether you expressed an interest in maybe doing the work, or more formally said you are going to remove the chimney breast and would like permission.
Having said that, if I would expect a formal application which would kick off permissions would include structural drawings and calculations etc.
Much as ever depends on wording within the lease, which we never ever get.
This is what I am trying to ascertain at the moment. As far as I know they asked for an opinion as to whether it was doable not permission and as you say they are two different things.Having said that, if I would expect a formal application which would kick off permissions would include structural drawings and calculations etc.
Much as ever depends on wording within the lease, which we never ever get.
All three flats whilst being lessee's are also the lessors because of the share of freehold setup. The articles of association dont mention anything about decision making and the lease doesnt make any mention of permission for alterations etc and the process just that any party to the lease should pay 1/3rd of the cost of external decoration and repairs and all the usual stuff.
mcdjl said:
surveyor said:
My suspicion is that this is going to come down to whether you expressed an interest in maybe doing the work, or more formally said you are going to remove the chimney breast and would like permission.
Having said that, if I would expect a formal application which would kick off permissions would include structural drawings and calculations etc.
Much as ever depends on wording within the lease, which we never ever get.
Not being a lawyer or surveyor, if some one were to ask me 'i'm thinking of removing the chimney, what do you think' my response would be 'I'm fine in principle, but will need to get an independent survey done (for which i expect you to pay) to be sure it won't cause issues'. For them both to get independent surveys done seems a bit much, especially if this is still at the idea stage. If its at the i'd like to get he builder started next week stage, then i'm not surprised they got the survey done.Having said that, if I would expect a formal application which would kick off permissions would include structural drawings and calculations etc.
Much as ever depends on wording within the lease, which we never ever get.
I would have thought this comes down to whether the persons commissioning the advice had capacity to do so on behalf of the freeholder, and whether it was appropriate given the informal nature of the enquiry.
Just because they are part owners of the freehold interest may not give them the right to incur any cost on the ‘freeholders’ part. If not then they obtained the advice for their own benefit & there may not be any contractual obligation on your friends part to reimburse them.
The devil is in the detail of the lease & the method by which the freehold is owned, eg Limited Company, informal or formal partnership.
Just because they are part owners of the freehold interest may not give them the right to incur any cost on the ‘freeholders’ part. If not then they obtained the advice for their own benefit & there may not be any contractual obligation on your friends part to reimburse them.
The devil is in the detail of the lease & the method by which the freehold is owned, eg Limited Company, informal or formal partnership.
Edited by N111BJG on Friday 4th September 15:38
N111BJG said:
I would have thought this comes down to whether the persons commissioning the advice had capacity to do so on behalf of the freeholder, and whether it was appropriate given the informal nature of the enquiry.
Just because they are part owners of the freehold interest may not give them the right to incur any cost on the ‘freeholders’ part. If not then they obtained the advice for their own benefit & there may not be any contractual obligation on your friends part to reimburse them.
The devil is in the detail of the lease & the method by which the freehold is owned, eg Limited Company, informal or formal partnership.
All three flat owners are also the lessors as said above and its held in a limited company named after the property address. As said above the lease makes no mention of the process for agreement on such things. Just because they are part owners of the freehold interest may not give them the right to incur any cost on the ‘freeholders’ part. If not then they obtained the advice for their own benefit & there may not be any contractual obligation on your friends part to reimburse them.
The devil is in the detail of the lease & the method by which the freehold is owned, eg Limited Company, informal or formal partnership.
Edited by N111BJG on Friday 4th September 15:38
Graveworm said:
martinbiz said:
That;s all very informative, but not really what the OP asked
The other 2 freeholders chose to spend some money on advice without consulting with or informing the OP and are now looking to be reimbursed by him. Personally I wouldn't think they have a leg to stand on. Others may know better.
The lease is a contract with the freeholder. If the lease says they (As freeholders rather than other leaseholders) can spend money to investigate an application and the leaseholder has to pay, then that's what they can do. The other 2 freeholders chose to spend some money on advice without consulting with or informing the OP and are now looking to be reimbursed by him. Personally I wouldn't think they have a leg to stand on. Others may know better.
martinbiz said:
Graveworm said:
martinbiz said:
That;s all very informative, but not really what the OP asked
The other 2 freeholders chose to spend some money on advice without consulting with or informing the OP and are now looking to be reimbursed by him. Personally I wouldn't think they have a leg to stand on. Others may know better.
The lease is a contract with the freeholder. If the lease says they (As freeholders rather than other leaseholders) can spend money to investigate an application and the leaseholder has to pay, then that's what they can do. The other 2 freeholders chose to spend some money on advice without consulting with or informing the OP and are now looking to be reimbursed by him. Personally I wouldn't think they have a leg to stand on. Others may know better.
Is this question about the process of gaining a licence to alter when the lease is silent on the matter or your friends obligation to reimburse the other two owners in the scenario you have described?
Also perhaps you’d clarify if the two other owners both sought professional advice (two surveyors or engineers have been consulted) or if they acted collaboratively and jointly sought the opinion of one consultant.
I often encounter situations where Leaseholder’s also part own the freehold when dealing with Party Wall Act matters as there is no point seeking to exercise rights that you already have or could obtain more easily in conjunction with a licence to alter.
The lack of express arrangements for running the freehold as an entity is not uncommon and several changes of leaseholder from those who originally acquired the freehold down the line can bring people together as co-owners who have no interest in acting in good faith towards their fellow leaseholders. Often because of unresolved and understandable disputes on other issues.
Also perhaps you’d clarify if the two other owners both sought professional advice (two surveyors or engineers have been consulted) or if they acted collaboratively and jointly sought the opinion of one consultant.
I often encounter situations where Leaseholder’s also part own the freehold when dealing with Party Wall Act matters as there is no point seeking to exercise rights that you already have or could obtain more easily in conjunction with a licence to alter.
The lack of express arrangements for running the freehold as an entity is not uncommon and several changes of leaseholder from those who originally acquired the freehold down the line can bring people together as co-owners who have no interest in acting in good faith towards their fellow leaseholders. Often because of unresolved and understandable disputes on other issues.
craigjm said:
... the lease doesnt make any mention of permission for alterations etc and the process just that any party to the lease should pay 1/3rd of the cost of external decoration and repairs and all the usual stuff.
Are you sure about that? I've read hundreds of residential leases and I've never seen one that didn't require the freeholder's permission for structural alterations.As such a covenant is essential for the protection not only of the freeholder's interest but also that of the fellow leaseholders I'd say that if you're right the lease is seriously defective.
But we're all basically just guessing. Without seeing the actual lease nobody can provide a definitive view.
I am a leaseholder of several rental residential flats, with one such flat within a block of eight (8) flats, where each leaseholder is also a director of the self management company.
In the above situation, a search of the Land Registry, will not only identify the Lease, and obviously the terms of the same, but also provide a copy of the management company's Articles of Association and Memorandum of Association, both being under the Companies Act 1985. The former sets out how the management company directors how business should be carried out by the company's directors, the holding of meetings, voting, expenditure etc. etc., with a minimum of two directors being a quorum, allowing for a meeting being both held and decisions voted on.
It is highly unusual for a Lease not to state, that a Freeholder should first be consulted before a leaseholder carries out structural works.
From what the OP has posted, the only complaint against the other two (2) leaseholders, is the fact that they did not give the OP's friend prior notice of engaging a surveyor, to raise additional objections to requesting in future being kept fully informed, may not be in the long and short term interest of the OP's friend.
More legal and general advice can be obtained via the Leasehold Advisory Service, link below.
https://www.lease-advice.org
In the above situation, a search of the Land Registry, will not only identify the Lease, and obviously the terms of the same, but also provide a copy of the management company's Articles of Association and Memorandum of Association, both being under the Companies Act 1985. The former sets out how the management company directors how business should be carried out by the company's directors, the holding of meetings, voting, expenditure etc. etc., with a minimum of two directors being a quorum, allowing for a meeting being both held and decisions voted on.
It is highly unusual for a Lease not to state, that a Freeholder should first be consulted before a leaseholder carries out structural works.
From what the OP has posted, the only complaint against the other two (2) leaseholders, is the fact that they did not give the OP's friend prior notice of engaging a surveyor, to raise additional objections to requesting in future being kept fully informed, may not be in the long and short term interest of the OP's friend.
More legal and general advice can be obtained via the Leasehold Advisory Service, link below.
https://www.lease-advice.org
The lease does not mention permission for alterations and therefore is silent on the process and the articles of association of the management company they are all shareholders in, unusually, does not set out any decision making processes or voting requirements etc. The whole thing is quite a mess. I have been pushing for them to get a Declaration of Trust and will continue with that. I cant see how they can refuse to pay up and leave the others out of pocket at this point but there needs to be some sense bought to the situation. Thanks all
craigjm said:
The lease does not mention permission for alterations and therefore is silent on the process and the articles of association of the management company they are all shareholders in, unusually, does not set out any decision making processes or voting requirements etc. The whole thing is quite a mess. I have been pushing for them to get a Declaration of Trust and will continue with that. I cant see how they can refuse to pay up and leave the others out of pocket at this point but there needs to be some sense bought to the situation. Thanks all
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