If you’re looking to buy a flat you will most likely have come across the term share of freehold. Even if you do have somewhat of an understanding of what this phrase means there are complexities that buyers need to consider.
This guide is also for sellers of freehold property and we explain how to extend your lease on a share of freehold.
Share of freehold essentially means that leaseholders collectively own shares in the freehold of a building, meaning the building itself, rather than only the flat you own.
In this comprehensive guide for individuals and businesses looking to buy or sell a share of freehold property, we cover the benefits and risks of owning a share of freehold. We also explore the legal processes involved in buying or selling, and the implications for property owners.
The page aims to inform you about the complexities and advantages of share of freehold transactions and the benefits of seeking expert legal assistance from Lawhive.
We’ve written this for:
Homeowners looking to buy or sell a share of freehold property
Property investors and developers
Legal professionals advising clients on property transactions
Individuals exploring the benefits of share of freehold ownership
Lawhive property solicitors can guide you through the process of buying or selling a share of a freehold property expertly, saving you time and money. Get in touch with us today for a free case assessment.
What is a share of freehold?
There are two main types of share of freehold legal structure, they are:
Joint ownership – you are registered as an owner of the freehold title alongside other flat owners in your block. This can only occur when there are no more than four flats in a block. This is because no more than four people can be registered as joint proprietors of a freehold title
Company ownership – or you may be a member of a legal business structure that owns the freehold of a building. Some or all the other flat holders may be members of the company with you
Freehold vs leasehold
It is useful to compare freehold with leasehold and share of freehold to understand the key differences between these types of property ownership and the implications for property owners.
The key difference between leasehold and freehold is that freeholders own both the land a property is built on and the property itself. Leaseholders only own the flat and not the building or the land on which the building is constructed on. The building of a block of flats is owned by the freeholder, while the leaseholder rents an individual flat from the freeholder.
If you have a share of freehold you own a share in the freehold of your building, often with other leaseholders.
Benefits of buying a share of freehold
It might seem unfair that you own a flat but still don’t own the land your flat is built on. Fortunately, in the last few years legislation has improved leaseholder’s rights by giving leaseholders the opportunity to take over the freehold in their building from the freeholder or take over the management of their building.
There are some significant benefits to owning a share of your building’s freehold:
Increased control over property – by owning a share of freehold alongside other owners, collectively you as fellow leaseholders will have a say in the control of the management of the property, including maintenance and the decision-making process for the building. Buildings are usually maintained to a higher standard when leaseholders are in control as they have a greater say in upkeep. Owning a share of the freehold will also give you greater control of lease terms, especially if you want to extend. Freeholders can usually extend their leases up to 999 years easily, typically without cost. This avoids the complexities of negotiating with freeholders and the expense of extending a lease under a different landlord and freeholder. Explore our lease extension services
Potential for higher property value – a share of freehold ownership can increase the value of the property. This is because they are more attractive to buyers mostly for the reasons mentioned above and below. When you sell your flat in the future, having a share in the freehold will make it more marketable, increasing your chances of finding more buyers and getting a competitive selling price
Lowering costs and fees – service charges and ground rent can be reduced when leaseholders collectively agree, this can be the case when leaseholders work together to get the best value for money from service providers and eliminate the costs of management companies
Risks and considerations
When weighing up whether to buy a share of the freehold of your building or not, there are some risks worth addressing and considerations that can help you make your mind up.
Management responsibilities
Taking on a share of the freehold of your building gives you added freedom to control the property as you see fit, however, it also comes with added responsibilities.
You and your fellow leaseholders will be responsible for organising property maintenance and management. This added responsibility can be a lot to handle, especially if you have many other responsibilities and demands on your time.
Disputes among freeholders can also be common. It’s worth knowing that disagreements or disputes with other leaseholders about how the building should be managed can lead to delays and complications in managing the property effectively.
If you are involved in a dispute, you may be able to negotiate a settlement using mediation. A mediator, an impartial professional can help both sides work out an agreement. It’s a confidential process and typically quicker and cheaper than going to court.
There are some legal complexities to buying or selling a share of freehold. If you want to sell your share of a freehold you will have to follow a collaborative process. You will need to consider collective decision-making, as you will require agreement from your fellow shareholders to sell your share.
You’ll likely require legal advice as it is a complex procedure to navigate.
Once you get permission from your fellow shareholders you will need to get your share valued and determine a fair value for your property with interested buyers.