While share of freehold ownership can come with many benefits, the grass may not always be greener in some cases, unfortunately.
Share of freehold nightmares often come about because it is very different to buying a freehold outright. Instead of being able to make decisions by yourself, you have to work with others to make sure the property stays safe, holds its value, and remains a pleasant place to live.
Neighbour disputes aren’t uncommon in all areas of property ownership and share of freehold is no exception. Collective property ownership can (and does!) lead to frustration and disagreements, so it’s important to understand the pitfalls and hurdles you might face how to address them, especially if you’re considering buying a share of freehold or forming a collective enfranchisement with other leaseholders.
In this article, we aim to explore some common share of freehold problems you may encounter, along with some tips on how you might deal with them.
Let’s dive in.
Property ownership: the lowdown
When you buy a freehold house, you own it outright, including the land it’s built on. That means you alone are responsible for looking after both.
Share of freehold and buying a leasehold, however, are different forms of property ownership that apply to flats or apartments. It’s likely you’ve heard of leasehold ownership, which is when you buy a property for a set amount of time (usually around 99-125 years). The key differences between freehold vs leasehold is: you don’t own the land the property is built on (the freehold). Instead, the freeholder does, and they are responsible for maintenance of the building’s exterior and common areas - which is great if you’re no good at DIY or hate mowing the lawn!
But what about share of freehold?
What is share of freehold?
Share of freehold is when a person who buys a flat or an apartment owns both their leasehold property and a share of the freehold collectively with other leaseholders that have also purchased a flat or apartment in the same building.
This means that the leaseholders together are responsible, and in control of, the management and maintenance of the building, as well as setting service charges. Share of freehold leases are also typically much longer than leasehold, usually being extended to 999 years instead of the average 125.
Freehold Shareholder Responsibilities
Collective freehold shareholders are responsible for all building and land maintenance, from making decisions to actioning (and paying for) those decisions. Exactly what that involves depends on the property. For example, if the building has a communal lift it is the responsibility of the shareholders to fix it when it breaks and make sure it meets health and safety regulations.
While some freehold shareholders may decide to organise this between themselves, others may decided to appoint a managing agent to help them.
Benefits of share of freehold ownership
Despite the title of this article, there are some benefits to having a share of freehold.
The main benefit is that you get a say in how your building is run and maintained, giving you more control over your living environment compared to traditional leasehold agreements, where a landlord or management company often calls the shots.
It also means you get a say in the cost (as you and your co-freeholders are responsible for setting service charges). You also get to share those costs and the responsibility of looking after the building in a way that traditional freeholders and leaseholders can’t.
Sounds great, right? And it can be awesome when all leaseholders are committed to working together and making decisions. But that's not always the case, as we'll explore below...
Common problems with Share of Freehold
While the share of freehold ownership model does give a leaseholder more control than they typically would have had in a more traditional arrangement, managing the freehold collectively can become time-consuming. This is especially true if communication and decision-making processes aren’t well-established, co-ordinated or upheld. For this reason, it’s essential to understand the potential issues that may arise.
Let's delve into some common problems and challenges you may encounter:
Maintenance disputes
One of the most frequent issues in Share of Freehold properties is disagreements over maintenance responsibilities. These can range from disputes about who should foot the bill for necessary repairs and who is in charge of getting repairs actioned to differences in opinions about how extensive maintenance should be or how much of a priority it is.
These disputes can sometimes lead to delays in addressing critical issues, which may cause them to worsen. Breakdowns in communication will also have a knock on effect, as leaseholders may feel reluctant to meet because of underlying tension or unpleasant past interactions.
Alteration conflicts and changes in property use
Alterations and renovations to individual flats or shared spaces can easily become a source of tension. What one owner sees as an improvement, another may view in an entirely different light. In some cases, they may also disagree with the proposed improvement entirely, or carry out work before asking the collective.
Differences in opinions about how these changes may affect property values or the overall living environment often lead to disagreements. Resolving such disputes often involves a careful consideration of the community's collective interests. Finding a balance between personal preferences and collective interests is key. However, this may not always be an easy thing to do and may be complicated by other factors also.
Financial tensions
Managing finances collectively can be tricky. It’s always difficult to talk about money and it's rare for every co-owner to be in the same financial position.
Conflicts may arise regarding contributions to the sinking fund (essentially a savings account for future maintenance costs), such as disagreements over how much each owner should contribute or how funds should be spent.
Disputes can also arise around finances if the person in charge of money is not open with the others about how much is in the account, how it is spent, or if certain leaseholders don’t keep up with their payments.
Making Decisions
As co-owners, you'll need to make decisions together, but reaching a consensus can sometimes be difficult. Differences in priorities, preferences, and communication styles can slow down the decision-making process, especially when it comes to significant matters like property improvements, repairs or rule changes.
Communication breakdowns
Effective communication is vital in Share of Freehold living. Misunderstandings, lack of clarity, or limited communication can end in confusion and frustration between co-owners. Ensuring that everyone stays informed and have opportunities to voice their concerns is crucial but if things aren’t able to be resolved, there are also resources available to you to ensure you can get communication back on track - from mediation to advice from a specialist property solicitor.
Emergency response planning
It’s always wise to be prepared for unexpected emergencies, such as a burst pipe or structural damage.
For freeholders, when something goes wrong, it is usually pretty straightforward to put the wheels in motion to get it fixed. But with share of freehold, disagreements can arise about the appropriate course of action, especially when immediate decisions are required.
Having a clear plan in place can field off potential disputes during stressful situations. Who to call, who deals with the problem on behalf of the other freeholders, how much is in your emergency fund, a traffic light system rating emergencies and how quickly they need to be handled - all of these can really help when those emergencies rear their ugly heads.
Insurance dilemmas
Securing adequate building insurance coverage is a collective responsibility. Disputes may arise regarding the choice of insurer, coverage limits, and premium payments. Ensuring that everyone is on the same page regarding insurance can prevent future headaches.
Lack of leadership & knowledge
There are many benefits to a group of leaseholders working together to maintain a building. The main being is that, as they are owners, they have the best interest of the property in mind. That being said, working together isn’t always easy - especially when people are unsure of their role or aren’t clear on what exactly their responsibilities are.
Whilst leaseholders aren’t expected to be experts in property law, it is helpful for them to at least understand their basic responsibilities when it comes to building maintenance, especially health and safety legislation. There is a very real danger of being prosecuted if you don’t comply with certain legislation, so seeking expert advice is always important, as well as ensuring everyone understands their role as freeholder shareholder.
Dispute resolution for share of freehold problems
Disagreements happen. It’s a fact of life and they're sometimes impossible to avoid. This is why effective dispute-resolution options are crucial for Share of Freehold property owners.
Mediation and negotiation are often the first steps to resolving disputes quickly while maintaining good relationships. However, if disputes persist, legal action may be necessary. Such disputes can be challenging and stressful, but there are effective ways to address and resolve them amicably.
Step 1. Open communication:
The first step in resolving any dispute is to communicate openly and honestly with your fellow co-owners. Arrange a meeting to discuss the issue, and make sure everyone has room to share their perspectives in a calm and respectful way.
Step 2. Share information:
Make sure all relevant information, documents, and evidence are shared openly with co-owners and, if necessary, with mediators, arbitrators, or legal representatives.
Clarity and accuracy in presenting your case can significantly impact the speed and efficiency of the resolution process.
Step 3. Seek legal advice:
If you haven’t done this already, it would be advisable to consult with a qualified property solicitor or legal advisor at this stage, especially when faced with an emotionally charged or complex situation. They can provide valuable guidance on your rights and responsibilities, as well as the most suitable way to resolve a dispute.
Step 4. Mediation:
Civil mediation is where an impartial third party, known as a mediator, helps progress the conversation between co-owners. Mediators help identify common ground and guide the negotiation process. If relationships are strained, working with a mediator can be a more cost-effective and less stressful way to resolve differences and come to an agreement.
Step 5. Arbitration:
If mediation doesn't lead to a resolution, arbitration may well be your next option.
Arbitration involves appointing an independent person (known as an arbitrator) who reviews the situations and makes a final, legally binding decision. While this method can be quicker than going to court, it does take the decision more out of your collective hands. Furthermore, it's essential to carefully consider the arbitrator's qualifications and expertise to make sure they're a good fit.
Step 6. Legal action:
Sometimes, open communication or mediation just aren't enough to come to an agreement. When that is the case, legal action may become necessary.
Common legal solutions in Share of Freehold disputes include:
First-Tier Tribunal (Property Chamber):
A First-Tier Tribunal in the Lands Chamber is a specialist court with a judge, specifically for property-based disputes. It’s where problems related to service charges, repairs, and other issues within Share of Freehold properties can be sorted out formally.
It offers a more accessible and cost-effective alternative to traditional courts as there is a fixed fee of £100 for most applications to the tribunal.
Court Proceedings:
Taking a share of freehold dispute to court is the last resort. While it can be time-consuming and costly, it may well be the only option if all other approaches have failed. At this point, it is important to seek legal advice from a solicitor experienced in property law to guide you through the process.
It can be a huge relief when a dispute is resolved and a decision is made. While you may want to put it behind you immediately, make sure to document any agreement first. In doing this you can ensure all co-owners are aware of and agree to the terms. This helps prevent future misunderstandings and provides a reference point if issues reemerge.
While disputes in Share of Freehold properties are sadly not uncommon, that doesn’t mean they have to strain relationships beyond repair. By approaching conflicts with patience, empathy, and a commitment to finding common ground, you can maintain a happy and successful living environment.
How to avoid share of freehold nightmares
Communication is key to a harmonious share of freehold collective relationship.
Being able to put across your thoughts and views while listening to and addressing the concerns of the other parties is the best way to reach agreements quickly.
Let's explore some ways to make this happen:
The power of regular meetings
To keep the wheels of communication turning, have regular meetings with your fellow co-owners to discuss property matters, share updates, and address concerns.
These meetings should be low-pressure, friendly gatherings where you can all chat and make decisions as a mini-community. Decision number one: who’s bringing the biscuits?
You should also give people in the group specific roles to help these meetings run smoothly and stay on track. Appointing a chairperson or property manager will help streamline decision-making and ensure everyone knows who's in charge of what.
Listening and documenting discussions
Effective communication is a two-way street. Be sure to listen actively to your co-owners' perspectives and concerns. This is a great way to make sure everybody’s points are being heard and are valid.
Another way to do this is to keep and share written records of meeting minutes and decisions made.
This way everyone can refer back if they are ever unsure, or if someone doesn't follow through on an action.
Embrace technology
Face to face meetings are great. But we're all busy, and it's not always possible to get everyone in a room together at the same time.
Using technology can help a lot with this. Group messaging apps or email lists are handy for sharing information and updates instantly. This way, everyone stays up to date and informed every step of the way.
Video calls are also fantastic if people aren't able to attend a meeting in person. Using Skype, Zoom or even Facetime mean co-owners aren't left out of important conversations and decisions are always made collectively.
Handling conflicts
Conflicts are part and parcel of any co-ownership journey. When they arise, instead of doubling down on your point of view, be open to finding solutions that work for all involved.
A lot of conflicts can happen during emergency situations, where emotions are high. To minimise drama around a sudden issue like a leaking roof or burst pipe, have a contingency plan in place well in advance. For example, you should all know who to contact and what steps to take if an urgent situation arises.
Decision-Making
When it comes to decision-making, aim for consensus whenever possible. This means working towards an agreement everyone is involved with.
If that's not possible (and it's not always!) putting the decision to a vote can be your fallback plan. Set clear rules for voting, and when everyone has agreed to this, make sure to go along with the verdict, even if the votes aren’t in your favour. It’s important to commit to the system.
It can take time, more than a little patience, and sometimes a dash of creativity to get co-ownership just right. But without a doubt, in working together, listening, and valuing each co-owner's input, you can really enjoy the benefits of Share of Freehold living, rather than find yourself in a waking nightmare!
How to avoid financial disputes in share of freehold
Money talk. The bit that we all dread and (especially us Brits) feel awkward talking about.
But it doesn’t need to be awkward! With the right approach, and the open communication we touched on earlier, it can be easy peasy to head off any money related headaches well before they become difficult to deal with.
Here are a few tips to help you avoid financial disputes as co-owners:
The Sinking Fund
Imagine a rainy day fund for your property. This is what a Sinking Fund is. In Share of Freehold, co-owners regularly (often monthly) contribute to a sinking fund that serves as a safety net for future maintenance, repairs, or unexpected expenses.
Fair contributions
How do you decide who pays, when and how much?
Typically, financial contributions are based on the size or value of your flat so that everyone pays their fair share while still remaining within a manageable budget.
That being said, should your finances change it is important to communicate that to the group, as there well may be room to adjust contributions until you are back on your feet.
Budgeting brilliance
To keep the finances of the communal property running smoothly, have a budget. This should outline expected expenses for things like maintenance, insurance, and property management. Openness is key. Keep your co-owners informed about financial matters. Share financial reports and updates regularly, so everyone knows where the money is going.
Keeping records
Financial disputes can get tense very quickly. Like any decisions made in your meetings, keep a clear record of finances and financial transactions, too, such as contributions, expenses, and sinking fund activity. It'll make balancing the financial books a piece of cake, promise!
Sourcing quotes
If repairs are needed make an agreement to get estimates from a set number of reputable contractors to make sure you're getting the best bang for your buck, then discuss the quotes with the group.
Having three quotes to present to the group can make coming to an agreement on costs and next steps much quicker, as they provide a benchmark for what to expect and makes sure everyone understands where the money is going, why, and who it is going to.
Get professional advice
Sometimes, financial matters can get a bit tricky. If they do, get professional advice in the first instance from a solicitor, accountant or financial advisor experienced in property management. They can help you navigate any financial storms that may come your way.
By contributing fairly, budgeting wisely, and staying prepared for unexpected twists and turns, you can keep your property running smoothly.
And remember, it's not just about managing money; it's about building a collective where everyone's investment is protected and valued.
Turning share of freehold nightmares into dreams
Share of Freehold properties offer homeowners a unique blend of independence and shared responsibility. While this arrangement can be great for the most part, it has its fair share of challenges which, if not dealt with sooner, can turn into a living nightmare.
By understanding the common problems and their potential solutions, Share of Freehold property owners can navigate the maze of co-ownership with confidence.
That being said, if you're ever unsure of your position in a dispute: legal advice and professional assistance should be your first port of call.
If you are having your own nightmare when it comes to share of freehold, or you're looking for advice related to a specific property problem, with Lawhive you can find the UK's best property solicitors to help you. To get started, simply tell us about your case and we will give you a fixed-fee quote in less than 5 minutes. What more, we can often get you up and running with a solicitor on the same day. Get in touch today to find out how we can help.