Lancaster Court, Central London

The Backstory

Lancaster Court is a high net worth mansion block in Central London, situated directly opposite Kensington Gardens. Twenty years ago the block’s freehold came up for auction and a resident who owned three flats within the building suggested that all the residents at the time join forces to purchase a share of the freehold.

Only, it never happened. The original freeholder who suggested the idea went to the auction themselves where they then purchased the freehold alone! And that same freeholder was still in possession of it when the residents – now with a Right to Manage company – contacted The Freehold Collective for help.

The Problem

Over twenty years, the group of leaseholders had failed to organise themselves. They didn’t have the 50% of leaseholders needed that were willing to purchase the property, and year on year they were running into organisational troubles and struggles.As the residents were struggling to form a collective group for a freehold purchase, they decided instead to form a Right to Manage company. Whilst the Right to Manage exercise was successful in removing the ability for the original Freeholder to manage the property, the Right to Manage company ran into many problems with a Right to Manage setup: gaining some control, but also taking on many liabilities and still being beholden to the freeholder.

When the management of the building was taken from the freeholder, the Right to Manage company gained access to the building’s finances, and they soon discovered anomalies in the accounts. Money had been collected for a reserve fund totalling £500,000, and although the accounts showed that £300,000 of the total sum had been spent, there was no trace of where it had gone, nor what it had been spent on.

Because the Freeholder had therefore “lost” his rights to management, the liability for the £500,000 was placed entirely on the Right to Manage group. The freeholder then demanded the money back – and got it, despite no trace of the original money ever being accounted for.

On top of that incredibly stressful problem, the building had also been severely neglected so the repayment meant that the Right to Manage group had to then collect more money for repairs and maintenance.

How TFC won the Freehold

When contacted by the leaseholders of Lancaster Court, The Freehold Collective suggested that all things considered, the group’s best course of action was to go for the freehold. However, this stirred up anxieties borne from the lack of success the first time around, and the group’s failure to organise in twenty years.

But thanks to an already proven and successful formula, we knew that we could help. We just needed to follow the below steps:

Considerate collaboration with residents

Out of the 50% of qualifying residents required, TFC secured 90%

The Freehold Collective spent a year engaging with leaseholders who lacked confidence. We engaged on an individual level, listened, understood and helped advise through anxieties and worries.

We organised everyone together, including residents who lived overseas in a massive collaborative international effort. We issued 24 individual newsletters and circulars, and took care of unique problems like payment issues for residents who owned a property in Lancaster Court but were currently residing abroad.

We knew we needed at least 17 leaseholders on board and we’re proud to say that out of 34 leaseholders 26 joined, only 3 chose not to participate, and another 3 didn’t because they were the freeholder! 90% of qualifying residents instead of 50% was a huge success and important foundational milestone. 

Taking care of counter notices and legal proceedings

The Freehold Collective and team we assembled negotiated a counter-notice of £7.9m with rights, down to £2m with an unencumbered freehold title.

The Freehold had previously been purchased for £750,000 and so, based on valuation advice, The Freehold Collective and the new group of participating leaseholders offered £1.3 million. However, the counter notice from the freeholder came back at a whopping £7.9 million, the ability to retain control, plus a number of ‘leasebacks’ which entitled him to still own valuable parts of the building.

This gave us pause. The amount was substantial, but we knew that if the claim proceeded to tribunal there was every chance that it would settle at £4million, which was too much. So, we responded to the counter-notice using an array of legal tools.

Using reports and analysis from the solicitor and a valuation report, we developed a strategy that the leaseholders could both understand and buy-in to.

We argued that £1.3million would avoid a tribunal which nobody wanted: the freeholder lived in the building and had more to lose should his living arrangements be compromised, and though tribunals are expensive, The Freehold Collective made it clear alongside the group of leaseholders that money would be little object to settle for a favourable result.

Our argument, analysis and valuation worked: we won the freehold for £2 million without leasebacks. It took us nearly 3 years, but it was worth it.

Complete support into Phase 3

We’re unique in the way that we deliver a third phase to our Freehold purchasing service: ownership. Once our clients have successfully purchased their freehold, we don’t just leave them – we provide a comprehensive support service as they adjust to their new roles as Freehold owners.

In our Lancaster Court project, 26 residents participated but some residents owned more than one property, and others wished to own more of the building. This left us with a problem: how to divide the freehold equally.

In the ownership phase, each flat pays the amount it costs to purchase a share of freehold for their own flat. In this building, that came to £600,000 and mostly involved long lease flats. The remaining £1.4 million was split into £500,000 for short leases and £900k for a 30 car garage which was also attached to the property.

The Freehold Collective invited all participants to either look at short leases (which provided investment opportunities), or getting the garage (offering parking plus storage). Through conversations, we found internal investors that would pay the initial money on the short leases based on the fact that when someone wants to extend their lease they can sell the interest in the short lease and make profit, and we found 10 leaseholders interested in the parking spaces and a share in the garage: so each paid £90,000.

Because we identify opportunities ahead of time and give those who want to invest the chance to, we always ensure to negotiate good and fair deals. Without the careful approach to finding suitable investors each leaseholder would have needed to contribute an additional £54,000, with many difficulties in assigning who benefitted from the assets. 

TFC now manages the investment company and ensures investments are good, with a solid return on investment. This is a key part of our service, we will talk you through options and structuring (which others won’t do). We know there’s always a short lease or garden which makes a complication, and we can recommend someone makes a short term investment to find long term profit.

The overall Lancaster Court result

Through The Freehold Collective’s meticulous guidance and coordination with leaseholders, solicitors, and surveyors, and with an already proven strategy, we were able to deliver a result that wasn’t at a huge cost to the leaseholders. We were proud to secure an outstanding deal without needing a tribunal. 

Without the hard work of our team, and our network of connections, Lancaster Court would not have achieved a qualifying majority or agreement for their leasehold. They would have potentially paid huge amounts of money, or their freehold acquisition would have collapsed and there would have been no structure, or direction.

We always find a personal story that resonates with us and we found it in one of the residents who wanted to future proof the building for her daughters. Not only did we supply that by helping her to win the freehold with her fellow residents, we also guided her in her role on the board of the Right to Manage group and helped coordinate her efforts and ours into a successful freehold acquisition. She’s now an investor and director in both boards. 

Her legacy of inheritance finally started to have value, and that’s what drives us at The Freehold Collective: helping and benefiting lives to change people’s circumstances just through acquisition of their freehold. 

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