What is happening?

 

We are buying the Northwood Hall freehold in a legal process set up by the UK Government in 1993 called ‘collective enfranchisement’. This will give all participating leaseholders an equal stake, financially and materially, in Northwood Hall.

 

Why are we doing this?

 

This is our response to the current state of dilapidation of Northwood Hall resulting from failure to properly maintain the building over a long period, and now, the last straw, the development planned on the roof. Currently we have no effective say in what happens to our building and all profits from any development go to the freeholder. As a leaseholder, you will not benefit from this development. You will instead have all the ongoing aggravation with little or no financial compensation. We want to change that so that everyone who owns a flat here and who participates can benefit.

 

How many leaseholders do we need to sign up?

 

There are 194 flats in Northwood Hall. We need 50% or no fewer than 97 leaseholders to sign up to trigger the legal process. We are already well on our way to achieving that figure and would like you to sign too.

 

How does acquiring the freehold benefit me?

 

There are many benefits in joining the scheme and becoming a shareholder in the new freehold company:

 

• An overnight increase in the market value of flats with freehold ownership – a freehold flat is always more attractive to buyers.

• A vote on what happens to your building as a shareholder, i.e. real control on issues such as the roof (but this doesn’t mean any time-consuming work for you).

• A long 999-year lease to help you sell your property more easily and for a higher value.

• Your property managed to the highest standard and cost-effectively.

• Northwood Hall fully restored long before the timetable outlined under the present management and in the best interests of all leaseholders, not just to serve the landlord’s financial interest.

• A rise in the value of your property value by upwards of 30%, given the price of comparable, well managed neighbouring freehold properties that have gone through ‘collective enfranchisement’.

• Financial transparency with rigorously audited accounts.

• Control over development. The landlord intends to build up to two extra storeys on the roof – flats from which they will profit exclusively. You have no power to prevent this development and you will get nothing from it financially. If you sign up to this freehold scheme you would get to vote on whether the Freehold Company permits a roof development and potentially a share in any profit. But the freehold is worth buying in its own right, regardless of any development issues.

• A scheme in full accordance with Government legislation.

 

This all sounds expensive, can I afford to join the scheme?

 

Yes, everyone can afford to join. This scheme has been negotiated by leaseholders in Northwood Hall, ensuring that eligible leaseholders can participate and benefit financially irrespective of their current financial circumstances.

 

How much do I have to pay to join the scheme?

 

Nobody pays anything up front. At the beginning of the process, participation itself is completely free of financial commitment and carries no financial risk. The entire legal process and all professional costs will be covered. If the process is unsuccessful for whatever reason, you will have paid nothing and lost nothing.

 

At what point is there a cost to me and what figure would I be looking at?

 

Only when the freehold purchase is successfully completed is there any cost to you. The cost of your share in the freehold equates to the value of extending your lease. That is calculated on the basis of the time remaining on your lease, the price of extending it and the value of your property.

 

You will fall into one of three categories depending on the length of your lease:

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1. If you have a 174-year lease, you pay a fixed amount, £100 only, towards the price and there is no contribution in terms of costs.

2. The 6 leaseholders with 107-year leases should expect to pay about £3,000 towards the price and your share of costs is capped at £1,000.

3. The 90 leaseholders with leases of less than 84 years left before the expiry date may expect their share of the price to be between £8,000 (for a typical 2 bedroom flat) and £15,000 (for a typical 3 bedroom). Your share of the costs is capped at £1,000 irrespective of the size of your flat.

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Irrespective of which lease you have now, the new 999-year lease will cost £400 each in conveyancing fees. Bespoke valuations for each flat are available on request.

 

How do I know whether this a good deal?

 

Aside from the significant benefit of any profit share from future developments by joining the scheme and gaining a share in the freehold, this is a very good price for your lease extension.

 

Anyone with 84 years left before expiry should be extending their lease in the next 4 years to prevent it dropping below the crucial 80 years that potential buyers expect to see as a minimum. Doing it through this scheme gives you a 999-­year lease with reasonable and capped fees.

 

Extending your lease through the current freeholder would be considerably more expensive. Leaseholders who have done so recently found the sum charged was based on a higher valuation of their flat, plus an additional £5,000 in fees, and for that received only a 90‐year extension.

 

All this means that this scheme is by far the most cost effective way for you to extend your lease (to 999 years), which you will need to do soon anyway, if you haven’t already done so.

 

How long will the freehold purchase take?

 

About 12 months after we serve the Notice which triggers the legal process.

 

What if I can’t pay my share of the cost by the time the freehold is purchased?

 

You can still sign up. If you cannot pay your share straight away, or you choose not to for whatever reason, then you may still join the scheme now while deferring payment of your share until a later date of your choosing.

 

This means you can still have your share in the freehold and the right to share in any development profits, but without having to pay anything right away. You will get the new 999-year lease whenever you decide you are ready to pay for it.

 

Will I be penalised or charged extortionate interest if I want to defer payment?

 

No penalty or interest is incurred by deferring payment of your contribution. When you are ready, at whatever date in the future, your share of the freehold will be calculated purely on the basis of the market value of your property and the length of your lease as at that future date. Ordinarily, as your lease gets shorter, the cost of extending it increases, and the more valuable your property is, the more expensive it is to extend the lease.

 

For this reason, the cheapest way to participate is to pay your share on completion of the freehold purchase, i.e. in about 12 months’ time. This is because your share of the price would be at its lowest value (before the block restoration is underway and raises property prices) and your lease would be at its longest too.

 

However, if you wish, you may defer payment, for example until you sell your flat. Your share of the freehold calculation would be based on the value of your flat at this later date and the length of your lease. The cost to take up your share in the freehold would therefore probably be higher, but there would be no additional penalty or interest to pay.

 

Who is financing the costs of setting all this up and the freehold purchase price?

 

A "White Knight" investor, Lindmead Ltd, a London-­based residential and commercial investment company, has come forward and made it possible and affordable for us to buy the freehold.

 

Lindmead specialises in residential properties which are not attractive to the wider market, such as property with assured shorthold tenancies or buildings like Northwood Hall that have become seriously undervalued.

 

They are not developers and they prefer to hold properties for the long term. They also want to see Northwood Hall fully restored to a state of repair.

 

Should I be concerned about this ‘White Knight’ investor?

 

No, where there is a shortfall in finances to complete the purchase, including a “White Knight” investor is not unusual (for more, click here).

 

How will the investor make a return on their money?

 

The investor will make money from Northwood Hall in three ways:

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1. from renting the garages

2. from lease extensions

3. from a share in any future development profits

 

It seems too good to be true – what’s the catch?

 

There is no catch. We have negotiated an agreement whereby we feel everyone involved ‘wins’ – both you and the "White Knight" investor.

 

This freehold scheme replaces the landlord with a company made up of both leaseholders and the investor. Without the leaseholders the investor can’t make money, and without the investor we can’t restore our building and profit from it.

 

How are the shares in the freehold company split?

 

Half of the shares will be owned by us, i.e. the flat owners, and half will be owned by Lindmead.

 

Who is accountable to whom in the Northwood Hall Freehold Company?

 

The new freehold company will have four directors, two appointed by the White Knight investor, and two appointed by the leaseholders (members of the freehold company). The company is required by its constitution (its Articles of Association) to hold at least one general meeting every year. Crucial decisions such as approval of any development or entering into large financial commitments (any contract worth more than £500k) require prior approval by shareholders in general meeting.

 

All decisions by the board must be by majority vote, i.e. they must be supported by three out of the four directors.

 

All directors have a legal obligation to act in good faith (a fiduciary duty) in promoting the interests of the freehold company and its shareholders.

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Will David Wismayer be involved?

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Mr Wismayer will not be a director of the freehold company. Whether he is involved in any role going forward will be decided by the directors. Should the directors decide to employ Mr Wismayer to handle the refurbishment of Northwood Hall, he would be answerable to them.

 

Must we endure lots of unwelcome development so the investor can make lots of money?

 

No development is possible unless authorised by 75% of shareholders voting in general meeting.

 

Could we purchase the freehold ourselves without the investor?

 

Theoretically yes, but in practice no. The problem we cannot realistically overcome is the significant cost of financing the contributions payable on behalf of freehold non-­contributors and all the costs of buying the garages and the legal and professional costs. The gap in the financing for which we need the investor is about £1 million.

 

If it’s such a ‘win‐win’, who loses out on this freehold purchase?

 

The current landlord and owner of the freehold is the big loser in this scheme. Even though they own over 30 flats at Northwood Hall, they are not entitled to participate in the new freehold purchase. Once the legal process is set in motion, there is nothing they can do to stop it.

 

Won’t the purchase of the freehold mean the building repairs are delayed even further?

 

No, the new Freehold Company will accelerate the process.

 

The current manager won’t be undertaking any repairs until the potential development of the roof goes ahead, which could take up to 3 years. Even then there is no guarantee that the building will be fully restored, as it is likely that refurbishments related to the currently planned development will be prioritised (e.g. the lifts and lobby entrance).

 

Official completion of the freehold purchase should take 12 months and that time can be used to carry out a full survey of the building, obtain quotes and reach agreements on the work that is needed.

 

What are the plans when the freehold purchase is completed?

 

1. immediately put in place plans to restore Northwood Hall to a good state of repair as quickly as possible

2. investigate the viability and desirability of a roof development

3. co-­ordinate any development alongside the restoration work

4. re-­coup previous losses from management contracts and plough that money back into the building’s restoration to minimise further bills to leaseholders

5. appoint new building management

 

What happens if I don’t join in?

 

If you don’t sign up to participate in the freehold scheme you will not be a shareholder in the Freehold Company. You will not be entitled to a 999‐year lease or to vote for directors, to participate in decisions relating to Northwood Hall (such as a vote on a roof development), nor will you be entitled to any share in profit from such development.

 

Anyone wishing to participate after the purchase process is triggered would do so only at the discretion of the directors and will not be entitled to any share in development profits.

 

It follows that everyone should participate early and sign up now.

 

What if I’m selling my flat now or I decide to sell after we begin the legal process?

 

You may still participate in the scheme: without incurring any cost, you may assign the benefits and rights of participation to your buyer, thereby making your sale a more attractive proposition.

 

Haven’t we all been here before with the RTM Company?

 

No, this is not a repeat of the RTM Company process. The RTM Company had no money and was failed by its incompetent management. Buying the freehold in equal partnership with a professional investor provides sufficient financial resources and management expertise securing effective control over what happens at Northwood Hall. It is a process numerous leaseholders have gone through to ensure their buildings are managed in their interests and not the landlord’s.

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This is a proposal of real importance and an opportunity not to be missed.

 

What should be my next steps?

 

We have made all your offer documents and details of how the company will be run (the Articles of Association) available to you for full transparency.

 

We welcome you reading them carefully and seeking an independent legal review of the offer (i.e. your own legal advice not connected to the landlord or manager) so that you can feel confident in signing up to join the scheme.

 

Independent information about collective enfranchisement can be found on the Leasehold Advisory Service website:

 

https://www.lease-advice.org/fact-sheet/collective-enfranchisement-buying-freehold-building/ 

 

When do I need to sign up by?

 

Our aim is for the vast majority of leaseholders to participate. 

 

This offer intends to bring everyone together at Northwood Hall, so we want to allow you a reasonable amount of time to fully understand the benefits. We are well on our way to reaching the 97 members required and are confident that once the offer is fully understood, every leaseholder will want to sign up.

 

However, we are not obliged to keep the offer open indefinitely. Once we have reached 50% participation we will trigger the freehold purchase and further sign-ups would only be accepted at the Company’s discretion.

 

We therefore encourage you to review your offer documents and either return your application form or contact us with any questions you may have now.

 

How do I sign up and join the freehold scheme now?

 

You should already have received your personalised Application Form but please feel free to email us for another copy if you need it.

 

When your application is accepted, you will receive your formal documents and your share certificate.

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If anyone has not received their documents please contact us immediately and we will forward them.

 

Contact us

 

We welcome any further questions you may have and please do not hesitate to Contact Us.

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