News on The Block issue 24, March 2005

Love thy neighbour

There is something about leasehold enfranchisement that seems to bring out the worst in people. Maybe it is that neighbours who have not even exchanged pleasantries for several years are forced to enter into a binding agreement. Or possibly it is that people are undertaking a business transaction without being able to choose the co-participants. Could it be that some residents actually enjoy the games of strategy, negotiation and cut-and-thrust that ensues between them? Whatever the explanation, Alex Greenslade at Leasehold Solutions appears to have seen it all.

For a man passionate about leasehold enfranchisement, it is not surprising that he gets frustrated when residents fail to see the benefits. Without at least half of the owners in a block agreeing, the freehold purchase cannot proceed. But it is common for owners to play a game of cat and mouse in the early stages. “A comment that I just can’t abide is, ‘I’ll do it if everyone else does it'”, explains Alex.

An obvious catch 22. In freehold acquisition, participants either need to be convinced that their neighbours will take part eventually or persuaded to go ahead regardless of the decision of their neighbours. When the complexity of such negotiations becomes apparent and the arguments spin out, then at this point transactions that are managed and coordinated by the owners themselves often collapse.

In many cases non-participants in a freehold purchase fail to take part for the wrong reasons. Whether politically, they may be trying to prevent the purchase taking place or they simply do not feel the need to stump up their share of the purchase cost, some decide at the outset that they will not be convinced to take part.

The 1987 Landlord and Tenant Act provides for the right of first refusal to flat owners and compels the freeholder to offer the freehold to them. The same compulsion does not exist when the neighbours become their freeholder.

The extent of some owners’ vindictiveness can easily be underestimated. “I met a chap, Mr Wheeler, in a supermarket two years after we helped him and his neighbours to purchase their freehold. At the time there was one particularly notorious non-participant, a Mr Cartwright. Soon after the transaction was completed Mr Cartwright changed his mind and decided he wanted to have a share of the freehold after all. Mr Wheeler had put up with his neighbour’s previously uncooperative attitude and was in no mood to sell the share easily. Eventually the newly-formed freehold company sold Mr Cartwright his share for £8,000 – double what the members of the original group had each paid!”

In many cases, when Alex’s company Leasehold Solutions contacts prospective freehold purchasers in a block, it is the first they have heard of buying their freehold. Using a facilitator can be the most economical way of conducting the transaction. However, the uninitiated residents occasionally feel it will be cheaper doing it themselves. “I have lost count of the number of times residents have decided to tackle the freehold purchase themselves after we have made them aware of the option to do so. In many cases they call us six months down the line asking us to pick up the pieces.”

Of course some self-purchases run smoothly. That is generally because one person leads the process, gathering signatures and bringing consensus at every stage. At one point Alex himself was that person. And it was the realisation of the complexity, the time involved and the patience in negotiations that led to the creation of Leasehold Solutions some years ago.

One of the more prestigious projects the company has been involved in was 26 flats in London’s Onslow Square. Owners include the finance controller of one of the world’s largest mining companies, not one but two shipping magnates as well as titled aristocracy. In provincial and suburban developments it can be difficult to get hold of owners at the best of times. But, when several of the parties involved are frequently in different time zones it raises a whole new set of issues!

Alex and his co-director Anna Bailey recall that they needed 14 participants to ensure that the Onslow Square project went to the next stage. It had taken them months of running around and telephoning to secure the agreement of 13 residents. Since the 1987 Landlord and Tenant Act stipulates a strict schedule, they only had a matter of hours to secure the 14th. With the clock ticking, one of the owners had in-turn agreed, backed out and then agreed again to participate, all in a six-hour period. “The solicitor was in tears at the end of it – really”, recalls Anna.

Despite the potential tears for all the parties it is the very frustration and heartache that forces neighbours to get to know each other better. The sheer scale of the work involved in achieving the common goal of freehold purchase often forces neighbours to get to know each other better. While in rare cases the enmity created may persist, Alex and his team find that many clients end up finding leasehold enfranchisement a bonding experience. And once the dust settles, flat owners who did not even know each other’s first names can become friends. And maybe it is just a bonus that they can all now control their leases and no longer need to involve a third party freeholder!

Copyright Leasehold Solutions and Alex Greenslade. Reproduction by permission only