Freeholder, Leaseholder – can you be both?

Reply to the comment left by Chris Bradley at 25/03/2023 - 15:35
There will always be 2 entities.
The leaseholder will have a share in the company that owns the freehold.
Trust you have grasped the concept.
I regret I cannot answer any more questions on this topic, unless it raises some interesting or novel point.
Thank you.

Reply to the comment left by Chris Bradley at 25/03/2023 - 15:35
I am not an expert but my understanding is that you cannot get a mortgage on a freehold flat ie where there is no lease.

Usually the freehold is held separately, in a company which is used to manage the property - insuring the property, doing maintenance and charging ground rent.

If the leaseholders buy the freehold between them they then set up their own company, issue themselves shares in the company and the freehold is transferred into it. eg 12 flats : 12 shares. Each leaseholder can then grant themselves a 999 year lease extension with zero ground rent. They now own a leasehold flat with share of freehold.

There are variations on this. For example I own the freehold of a building divided into 2 leasehold flats of which I own both. The freehold is held in a company along with another freehold I own for a block of 4 flats. I own 3 of those leaseholds and the 4th leaseholder pays me ground rent into this company. A separate company is used to manage the block - I now have a block management company doing this.

Reply to the comment left by JB at 25/03/2023 - 19:11
This goes right back to the original post.
"If the leaseholders buy the freehold between them they then set up their own company, issue themselves shares in the company and the freehold is transferred into it. eg 12 flats : 12 shares. Each leaseholder can then grant themselves a 999 year lease extension with zero ground rent."
There will be a value on the freehold in order to buy it, how is this determined? What then is the value of the 12 new leases? Would these have to be the same as the cost of the freehold to mitigate any tax? otherwise there will more than likely be a gain and thus a tax liability.
So if I was one of the 12 flat owners, I would be invited to pay to buy a share of the freehold hopefully at a reasonably low price and then purchase a new lease from the Freehold company again at a reasonably low price - sounds good until as in as in my circumstance the tax adviser works backward from the mortgage value attached to the lease and presents me with a massive gain.

Confused you will be.
The freehold reversionary interest held in a Resident owned freehold management company has no value except for the £1 voting shares issued to each leaseholder as share capital.

Each LH has two sets of obligations (1) as shareholder to comply with memorandum & articles and companies act 2006 and )2) as tenant or lessee with obligations to the landlord or lessor the man co acting on behalf of the lessor or landlord set out in each leaseholders own lease contract.
The asset value is in the lease on the flat on which the mortgage is secured.
The freehold man co is dormant. The only income is service charge held by the LL /landlord in a statutory trust account and is tax exempt and can legally only be spent on maintenance costs set out in the lease.
Service charge is not company money.
If LH as shareholders vote for something not under provisions of the lease then that undertaking is funded out of their own pockets and cannot be through the Man Co.
Also if a leaseholder lets out his flat he must declare this income for his own tax liability and it has nothing to do with his service charge liability to the man co as lessee.