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What Does Share of Freehold Mean?

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If you’ve bought or rented a property, you’re likely familiar with the terms leasehold and freehold. Did you know, though, that properties can have both? In a nutshell, buying a share of the freehold gives you shared ownership of the freehold title of a building.

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Share of freehold meaning

Typically applicable to flats or maisonettes that make up a larger property, the share of freehold can take two forms. As the leasehold owner, the freehold may be split between all tenants in the property – up to four owners can be included, with all their names on the freehold.

Alternatively, a company may own a block of properties and offer a share of the company holding the freehold – also known as a membership – to property owners. In this case, all property owners’ names will be on the title deeds.

What’s benefits does share of freehold give homeowners?

Many people find it confusing that they can own a leasehold property and have a share of the freehold. Why not just do away with the leasehold altogether? We understand it may seem complex.

The primary reason why leaseholds with freehold shares work this way is because of the transference of obligations.

When purchasing a property with a leasehold, both the seller and buyer have obligations that are outlined in the lease. This allows for the obligations to be transferred between them easily.

Leasehold properties are usually part of a block, in which multiple people live in the same building in their individual homes. Without a lease, homeowners could disregard their communal duties and property upkeep, as stated in the lease agreement.

This provides a level of protection for both the freeholder and the leaseholder.

Having a share of the freehold when owning a leasehold property provides the following benefits:

  • Greater control over maintenance obligations.
  • No issues with dishonest landlords.
  • All homeowners are invested in the building.
  • Cheaper service charges.
  • Cheaper lease extensions.
What Does Share of Freehold Mean
The primary reason why leaseholds with freehold shares work this way is because of the transference of obligations.

Share of freehold problems

Owning a share of a freehold as a homeowner has its benefits, but there are also drawbacks to consider. Maintenance costs can be higher in some years, but the lower service charge can be a balancing factor if you own the property for a longer time.

Selling can be tricky, as all other freehold owners must sign the transfer of the freehold. Additionally, the homeowner may need to take on administrative tasks, accounting duties, and arrange property insurance.

It is worth noting that not all leasehold homeowners with a share of the freehold are affected by these downsides.

Can you get a mortgage on a share of freehold property?

You can obtain a mortgage on a share of freehold property. However, some lenders may be hesitant to provide this type of loan due to the potential costs associated in the future.

Nevertheless, there are a multitude of lenders who are willing to offer mortgages on shares of freehold properties. If you’re looking to purchase one, take into account the following:

It is easier to get a mortgage on a property with a longer lease remaining. Lenders are more likely to approve mortgages on shares of freehold properties that have a management company in place.

You may be required to pay a higher deposit or a higher interest rate to offset the perceived risk to the lender.

Our thoughts

Buying or selling a property with a share of freehold should not be any more or less difficult than other types of property transactions.

The property market includes a mix of freehold and leasehold properties, and a share of freehold properties is just another option. Therefore, there may be some different administrative processes or requirements to take into account.

If you are having trouble selling a share of freehold property, you should consider contacting a cash house buyer such as Property Saviour.

We can purchase your property with our funds, offering you a guaranteed sale. Furthermore, we provide a ‘sell flat fast’ service, allowing you to bypass any potential issues related to a short-lease property.

So, if you are looking for a fast house sale, get in touch with us to receive your free cash offer today.

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