- Written by
- David Gibson, Partner
There are many roads to buying your own freehold, from striking a deal with the current freeholder, accepting rights of first refusal notice or even enfranchising your block along with other flat owners. One common decision you will face though, is whether to buy the freehold in your own individual names, or whether to form a company to own it in a company name.
It’s an important choice, and as such we set out here three advantages and disadvantages of each route.
Buying the freehold in individual names:
- It’s simple for small groups. Provided there are no more than four of you participating then all of you can be named as joint owners at the Land Registry.
- There is no repeated administration. The property simply sits at the Land Registry in joint names and there is nothing further to do until an event happens affecting your freehold.
- It’s cheap. There is no company to establish or any decisions to make, you simply put the property into the names of the people who own it and there is no necessity for further paperwork or costs.
- It’s more complicated for big groups. If there are more than four of you buying it, you’d need to set up trust documentation behind the scenes to make it work and that can be quite complicated and require specialist trust advice. Even with a smaller group, you might need some additional documentation so that everyone is bound by a set of rules for what happens when one of the owners sells their flat, and for how you will work together to fulfil the freeholder’s obligations in the leases of the flats.
- It’s tricky when someone sells. You need to get all the owners on board every time the freeholder needs to enter into a document. If you have an arrangement where a selling flat owner also gives their share of freehold to the new owner, then every time a flat is sold you’ll need to get a transfer deed drawn up and signed by each of the individual freeholders. This can hold up sales of the flats or make them more costly.
- Life (and death!) can complicate things. You have to have everyone working together to sign most documentation affecting the freehold, especially when someone sells a flat. If you fall out with your neighbours you’ll still be forced to contact them all when this happens. Also, you’ll need to stay in touch with all of them to agree on things like maintenance and insurance, and if someone goes missing, sublets their flat and moves away or even dies, you’ll have a trickier time running the freehold. If you wish to extend the leases at the flats, you’d also need all the owners to sign that paperwork off and potentially instruct solicitors as well, which can be an administrative burden.
Buying the freehold in a company name:
- You don’t need everyone involved to make decisions. You can elect directors who handle the running of the building between them, and have the power to replace them if they aren’t doing a good job of it. You don’t need to be in touch with every neighbour, just a key few who run the building.
- It’s easier to transfer ownership of the freehold. When it comes time for someone to sell you can just pass your share of the freehold company to the new owners.
- It has built-in rules. The company can have “articles” drawn up that set out what it can do and how it will run, so you can have some control of this from the get-go.
- You need to make company filings. If you fail to file required documents and statements at the right intervals at Companies House your company may be struck of the register. If you then fail to get it reinstated in time you may find that you need to buy your freehold back again from the Crown. However, you can appoint a professional to help with the company compliance work.
- You need volunteer directors. Someone (or more than one!) needs to step up and run the building as a director, which can be quite a bit of responsibility and is usually an unpaid role.
- Directors have significant responsibilities to the company, known as director’s duties. Please see our separate article on this subject for more information.
This list isn’t exhaustive, but serves to give a primer on the issue you’ll need to consider when deciding whether to use a company name or your or names. There is no “right” answer, and the best option for you will always depend on your own individual circumstances.
For more information or to discuss this further, we recommend that you contact our leasehold team:
You can email for the attention of our leasehold team on: email@example.com
Or call and ask to speak to a member of our leasehold team on: 0208 290 0440