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Share of freehold: When joint owners should consider a Declaration of Trust

By Simon Tye, Legal Adviser

January 2013

Where leaseholders of flats wish to buy the freehold of the building, or where they already own it, they should consider carefully the basis on which they wish to hold the title to the freehold. This can affect the future management and maintenance of the building.

Many leaseholders in blocks, or converted buildings, will hold the freehold via a company of which all the participating leaseholders will be members. Decisions can then be taken under the rules of company law, by the directors or by majority of shareholders.

Where the building contains only a few flats it is not always appropriate to form a company to share the freehold, as for so few leaseholders this can be prove cumbersome, especially if there are only two leaseholders in the building.

The alternative, where there are four or fewer leaseholders sharing the freehold, is to own it jointly on the title deeds. Where this happens it is advisable to enter into a Declaration of Trust which will set out, in a binding document, the relationship and obligations between the co-owners.

The problems that we often hear at LEASE, where there is a share of the freehold on the title deeds without a declaration of trust, include:

A Declaration of Trust is not a cure-all, but it can help resolve the above problems.

The Declaration of Trust can include the following:

As mentioned above, the Declaration of Trust could be entered into when the leaseholders buy the freehold together or even when they already own it. However it is likely to be better to do it on purchase, as it may be easier to obtain agreement at this stage than later, when ownership is established and the parties may have become entrenched.

It is advisable to use a solicitor who specialises in this area to draft the declaration of trust.

Further information:

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LEASE is governed by a board, appointed as individuals by the Secretary of State for the Ministry of Housing, Communities & Local Government.