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What is Share of Freehold?

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In this edition of property terminology busting, we are going to discuss what a share of freehold is. If you have been searching for a flat in the open market, you may have come across listings that advertise ‘share of freehold’.

The meaning of the term is not widely known. Share of freehold comes with complexities that all potential buyers should understand. In this article, we will provide a straightforward explanation of these complexities.

We will answer common questions related to the share of freehold, such as what it means and how it is different from a regular leasehold arrangement.

We will also explain how to extend your lease on a share of freehold and outline how you can buy a share of freehold on your leasehold.

Lastly, we will discuss both the pros and cons of share of freehold and give our verdict on whether or not it is a good idea.

Table of Contents

What does share of freehold mean?

If you buy a flat with a share of freehold, you will have full ownership of the property and its land. This will be shared with the other people who own a share of the freehold.

By owning a share of freehold, you will have more control over the block of flats and a say in how it is operated. You won’t have a landlord who can be exploitative and dictate what you do.

Leasehold vs. Freehold 

In brief explanation, the key distinction between a freehold and a leasehold property is that a freeholder owns both the property itself and the land it stands on.

Meanwhile, a leaseholder only owns the flat, not the land or the building it is situated on; they are required to pay ground rent to the freeholder to rent the land.

Leaseholds are widely used in flats in the UK to formalize the relationship between multiple residents on a shared land. Furthermore, they allow for the division of responsibility for the upkeep and repair of property among the residents.

This is usually reflected in a service charge that is used to cover essential repairs and maintenance of the property, which is paid to a management company acting as the freeholder and coordinating the maintenance.

A share of freehold is a different arrangement from a leasehold or a freehold property.

In this situation, the leasehold to the property and a share of the freehold for the building and its land are both owned. There are two ways in which a share of freeholds can be structured.

What is Share of Freehold
By owning a share of freehold, you will have more control over the block of flats and a say in how it is operated.

Share of freehold in personal names 

A share of freehold held in individual names means that each person owns an equal portion of the freehold title. This is usually referred to as ‘tenants in common’, and legally these agreements are based on trust, which can be quite risky.

The maximum number of freeholders that can be on the title using this method is four. In cases when there are more than four freeholders or where the freeholders would like a more official arrangement, a share of freehold can be established through a limited company.

Share of freehold with a limited company

In situations involving more than four freeholders, or when a more formal arrangement is needed, creating a private limited company is an option.

 Each freeholder owns a share in the company and can also serve as a director. It is highly recommended to seek out the help of a solicitor, as company law expertise is essential for setting up and maintaining this arrangement.

In some cases, it may be wise to designate one member of the group as the company director with the others as shareholders.

Is a share of freehold the same as a leasehold? 

In a nutshell, no. A leasehold gives you the right to inhabit your property. You don’t have ownership of the property or the land it is built on.

You rent this from the freeholder. With a share of freehold, you possess both the leasehold of your property along a share of the freehold title, giving you a portion of ownership of the building and the land it sits on.

Is a share of freehold the same as a leasehold 
The lease is important since, without it, this regulation doesn't exist and so mortgage providers wouldn't be able to lend against the flat.

Do you pay ground rent on a share of freehold?

It depends on the arrangement of the share of the freehold agreement with the other freeholders. Generally, you may still need to pay some ground rent and service charges to a common fund for the property.

This is because you still live in the property on a leasehold basis, and upkeep and maintenance of the property are still required.

However, since you own a share of the freehold with other freeholders, it’s unlikely that you’ll face excessive service charges and ground rent.

Do I need to extend my lease if I have a share of freehold?

Yes, you need to extend your lease even if you have a share of freehold. This is because the lease is what regulates the relationship between the building occupants. It specifies how much each flat contributes towards maintenance and building insurance.

The lease is important since, without it, this regulation doesn’t exist and so mortgage providers wouldn’t be able to lend against the flat.

Do I pay to extend my lease if I have a share of freehold?

No, you don’t usually have to pay to extend your lease if you own a share of freehold. This is one of the benefits of having a share of freehold. Leaseholders who don’t own a share of freehold typically pay a premium to the freeholder to extend their lease.

However, all the other freeholders must agree to the proposed lease extension, which is usually the case.

Do I pay to extend my lease if I have a share of freehold
50% or more of the number of flats in the building must be owned by leaseholders who want to purchase a share of the freehold.

Do all freeholders have to extend their lease at the same time? 

No, freeholders do not need to extend their leases at the same time. Individual freeholders can extend their leases independently.

However, the advantage of all freeholders collectively extending their leases is that the leases can be modernised and updated. Also, some solicitors may offer discounts when many owners from the same freehold instruct them simultaneously.

When individual freeholders extend their leases, modernising or updating the lease terms is not always possible as different lease agreements could lead to conflicts regarding what is allowed in the building, creating difficulty with the day-to-day running of the property.

This is because differences in the lease agreements could cause conflicts regarding what is allowed within the building, creating difficulties in the day-to-day running of the property. 

Can I buy a share of freehold on my leasehold?

It is possible to buy a share of freehold on a leasehold, but permission from the current landlord or freeholder and half or more of your neighbours is needed.

You can request that the freeholder sell you the freehold at any time, but they are not obliged to do so. If they decide to sell the freehold, they must offer all leaseholders the first right of refusal to purchase it.

  • There are certain requirements for a group of leaseholders to buy the freehold on a block of flats: There must be two or more flats in the building.
  • Less than 25% of the building must be used for non-residential purposes.
  • 50% or more of the number of flats in the building must be owned by leaseholders who want to purchase a share of the freehold.
  • Two-thirds of the flats in the building need to be owned by leaseholders who have a long lease.

So, while not all occupiers need to be on board to purchase the freehold, certain conditions must be met. Additionally, the freeholder must agree to sell, or want to sell, the freehold title.

How to transfer a share of freehold?

To transfer a share of the freehold for a property, a formal deed is needed to transfer ownership from the current owners to the new owner(s).

Getting a mortgage on a share of freehold property
Make sure to purchase a flat with a substantial number of years left on the lease, as this can impact the value of the property.

Getting a mortgage on a share of freehold property

It is possible to take out a mortgage on a share of freehold property or flat, though some lenders may be hesitant due to the potential of unexpected costs.

However, some lenders are willing to take the risk. If you are seeking to get a mortgage on a share of a freehold flat, here are several tips that may help you get a successful outcome:

  1. Make sure to purchase a flat with a substantial number of years left on the lease, as this can impact the value of the property.
  2. Make sure there is a management company in place for the property.

Remember that only certain lenders are open to offering mortgages, and you may have to pay more for a higher deposit or higher interest rate than usual.

Is a share of freehold a good idea?

Pros and cons of share of freehold

Ultimately, owning a share of freehold on a property is a trade-off. It brings more agency and control over the property, but it comes with added responsibilities.

The key advantages of having a share of freehold are:

  • Lease extensions are cheaper and simpler.
  • You have more control over repairs and maintenance, usually at a lower cost.
  • Lower ground rent and service charges.
  • More control in managing the building.

However, like most things in life, these benefits come with some drawbacks. Here is a brief overview of the disadvantages of owning a share of freehold:

  1. Obtaining a mortgage can be more difficult and you may have to use a specialist provider. This can make it more challenging to sell your flat.
  2. Home insurance providers may be limited due to the share of freehold, making insurance more expensive.
  3. Freeholders must comply with legal obligations such as filing management accounts. If these requirements are not met, there can be fines.
  4. Managing the building can be difficult, especially if there are troublesome neighbours.

Selling a share of freehold flat

If you are looking to sell your share of a freehold flat, you may find it more challenging than regular leaseholds. Mortgages can be hard to come by, which will reduce the pool of potential buyers.

If you want to sell your flat quickly, consider selling your share of the freehold flat to a cash house buyer.

What is a Share of Freehold

FAQs about Share of Freehold

What's the difference between Share of Freehold and Leasehold?

Share of Freehold grants ownership of both the individual unit and a share of the entire property, whereas leasehold only provides ownership of the unit for a specific period, subject to a lease agreement with the landlord.

Can I sell my Share of Freehold?

Yes, you can. You can either sell your share along with the unit or separately. The buyer would then become a co-owner and share the responsibilities and benefits of Share of Freehold ownership.

What happens if disagreements arise among co-owners?

These can be resolved through discussions and, if necessary, a democratic vote. Most properties have protocols in place to handle conflicts and ensure the smooth functioning of the property.

Is Share of Freehold common? Is Share of Freehold common?

Yes, it is more common in some regions than others. It is especially prevalent in the UK, particularly in older properties that have been converted into flats or apartments.

Can the management structure change?

Yes, co-owners have the authority to change the management structure if they reach a consensus. This could involve appointing a new management company or revising the property’s governing documents.

Are there any downsides to Share of Freehold
It doesn't matter what condition the property is in - we'll buy it and provide you with your solicitor to cover all associated costs.

Are there any downsides to Share of Freehold?

While there are many advantages, Share of Freehold ownership also requires active involvement in property management, which can be time-consuming. In addition, disagreements among co-owners could potentially lead to conflicts.

Property Savior can purchase your freehold flat for cash in as little as 10 days without charging any fees.

It doesn’t matter what condition the property is in – we’ll buy it and provide you with your solicitor to cover all associated costs. Our service is fast, easy and stress-free, making it a great option for you.

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