What is Share of Freehold?

When you hear the term "share of freehold," it refers to properties that have both a leasehold and a freehold component. Acquiring a share of freehold means you have shared ownership of the building’s freehold title.

What Does Share of Freehold Mean?

Purchasing a property with a share of freehold means you own the leasehold of your specific property, plus a share of the freehold for the land and building that the property is in. This setup is most commonly associated with flats. Essentially, you own the leasehold for your individual flat and share the freehold of the entire building and the land it stands on with other flat owners. This collective ownership can be managed in one of two ways: through joint management or a management company, regardless of the method, you still hold a share of the freehold for the property.

Limited Company Share of Freehold

One method of managing a share of freehold, particularly when there are more than four freeholders, is to create a private limited company. This company is registered as the building’s freehold owner, with you and the other co-owners registered as shareholders and directors. Using this method means you will need to adhere to company law procedures as part of your homeownership responsibilities. In some cases, it might be preferable to appoint one resident as the company director, with the others remaining as shareholders.

Share of Freehold in Personal Names

Often referred to as ‘tenants in common,’ this method means that each individual holds an equal percentage share of the freehold. For instance, if there are four owners, each would hold a 25% share of the freehold, this arrangement operates based on trust, which can be risky. However, as all parties are equally invested in the property and there are fewer administrative fees compared to a limited company, it can be a suitable option in some scenarios.

Is Share of Freehold the Same as Leasehold

The key difference between a leasehold and a share of freehold is that with a leasehold, you own the lease to your property (typically lasting decades or centuries) but still pay ground rent to the freeholder, who owns the building, the land it stands on, and the airspace around it. In contrast, owning a share of freehold means you own a portion of the building’s freehold along with the leasehold for your individual property.

The Pros and Cons of Share of Freehold

Having a share of freehold gives you a direct say in what happens with the block or building, however it can also involve additional administrative duties on top of your homeownership.

Share of Freehold Benefits

  • Higher Property Maintenance Standards: The building is owned by all current occupants who should be equally invested in its upkeep.
  • Lower or No Ground Rent: As co-owners, you might not need to pay ground rent.
  • Lease Extensions: You can extend your lease up to 999 years at no extra cost, minimizing devaluation due to shortening leases.
  • Lower Service Charges: With an internal management company (e.g., you and your co-freeholders), service charges are typically lower.

Problems with Share of Freehold

  • Variable Service Charges: Monthly maintenance costs can fluctuate, sometimes requiring substantial payments for significant repairs.
  • Administrative Burden: Managing the building can be time-consuming and costly if not done correctly.
  • Insurance Complications: Arranging home insurance can be more challenging and expensive.
  • Rental Restrictions: Renting out your property might be difficult if your neighbours are opposed or if your lease does not permit it.

Share of Freehold Extension

Owning a share of freehold allows you to extend your lease without paying a premium, but this requires agreement from all other freeholders. While your co-freeholders do not need to extend their leases simultaneously, it is often advantageous if all share of freehold owners extend their leases at the same time, allowing for modernization and updates.

Service Charges and Ground Rent

Even with a share of freehold, you may still have to pay ground rent and service charges, as you live in the property on a leasehold basis. However, as a co-owner, it’s less likely you’ll face excessive or unfair charges.

Transferring Share of Freehold

When selling your leasehold property, you can transfer your share of the freehold. This involves a formal deed that passes ownership from you and your co-shareholders to the new property owner and the remaining co-shareholders.

Getting a Mortgage on a Share of Freehold Property

It is possible to get a mortgage on a share of freehold property, though some lenders may view the potential costs as a risk. However, many lenders are willing to offer mortgages under certain conditions:

  • Long Lease: Ensure the flat has a long lease, as this impacts its value.
  • Management Company: Verify that a management company is in place.
  • Higher Deposit or Interest Rate: Some lenders may require a higher deposit or interest rate.

Let Us Help You with Your Next Move

If you’re considering purchasing a property with a share of freehold, Chewton Rose experts are here to help. We provide the expertise and technology to make your move smooth and efficient.

Let us assist you with your next property purchase. Whether you're buying or selling, our knowledgeable team can guide you through the complexities of share of freehold properties, ensuring you make informed decisions and secure the best possible deal.