Share of the freehold properties ensure that the quality of communal spaces in properties such as flats are upheld while offering a number of benefits to those now responsible for its upkeep. However, it is important that you understand what having a share in the freehold of a property means, to avoid finding yourself saddled with enormous bills and feeling limited on what you can do.
We at Starck Uberoi can offer superb legal advice on what the implications of having a share of a property’s freehold are, as well as help you with your conveyancing process should you decide to buy the property.
What does ‘Share of the Freehold’ mean?
Share of the freehold is somewhat a combination of being a freehold owner and a leasehold owner. While you are still bound by the terms in the lease, you have a share in the ownership of the freehold (in the property itself) for the duration of the lease, which gives you the freedom to do more than a standard lease would allow. Share of the freehold properties are almost always flats or apartments.
A share of the freehold property is usually set up in one of two ways:
- The freehold is split up between flat owners– The freehold can be divided between up to 4 people who own a flat in the building in question, and the freehold will be held in each owner’s personal name. Those who own shares in the freeholders will act as trustees and a declaration of trust deed may be necessary to prevent future conflict over contributions made to the property.
- A company owns the freehold and flat owners can buy a share– In this scenario, residents will buy a share in the company that owns the freehold or you will receive your share in the property by way of having your name in the property’s title deeds. Either way, you will still own a share in the freehold of the property. This is the more common scenario.
What is the point of Share of the Freehold Properties?
When each flat in a block is a freehold property, it is difficult for the seller to transfer responsibilities – such as maintaining the property and service charge payments – to the buyers. Without a lease, no-one would be put in charge of these communal duties and the building could end up falling into disrepair; a share in the freehold grants those who accept more responsibility a number of benefits in exchange for them having to oversee the property’s upkeep.
Why do share of freehold properties still have a lease?
Most share of freehold propertiesare flats, apartments and maisonettes – if you were to buy one of these properties without a lease, it would be almost impossible to secure a mortgage for it. This is mostly due to the law surrounding covenants:
- Positive covenants: positive covenants state that the holder has an obligation to do something, usually to maintain something or make sure certain payments are made.
- Restrictive covenants: restrictive covenants mostly just prevent the holder from doing something, such as building on some land.
Positive covenants are harder to transfer between freeholders than restrictive covenants, so without a lease you could not be sure that there was someone designated to ensure necessary upkeep of the building is done.
Also, a lease allows a landlord to access the entire building to ensure their obligations to keep the property in a habitable state are fulfilled. Naturally, more flats are therefore subject to a lease should someone who isn’t a shareholder need maintenance done in their property, which would still be the landlord’s responsibility.
There is also the simple fact that by having a lease, the landlord can still enforce certain rules, such as banning or demanding rent for pets.
What are the benefits of having a share in the freehold of a property?
Some of the benefits which come from a share of freehold property include:
- You can extend your lease without paying a fortune– Extending a lease can be extortionately expensive, and properties with a short lease remaining can be incredibly difficult to sell. This is the main benefit of a share of leasehold property; you can choose to extend your lease to up to 999 years without paying an incredibly high premium, which will protect your investment for years to come.
- More control over maintenance– We’ve all heard stories of nightmare landlords who take forever to solve maintenance problems or choose ineffective professionals to repair things. By having a share in the freehold, you can ensure issues are resolved yourself quickly and effectively. Plus, this way, your property is likely to be kept to a higher standard, as those with a share in the freehold have a greater interest in a building’s upkeep than the landlord who is just trying to make money.
- It is easier to make changes to the lease– Because you own a share in the freehold, if the changes you wish to make to the lease benefit all parties, you can make those changes without all of the formalities required for changing the lease for a standard leasehold property. To find out more, please see our blog titled Deed of Variation of Lease.
Will I have to manage all the maintenance myself?
The responsibility of maintenance will fall to all of those with a share in the freehold for the upkeep of the building, and conflict may arise when disputes over what needs to be done occur. These can be settled in court if necessary, but it is always better to settle disagreements out of court.
Alternatively, if you and the other shareholders do not want to take on the responsibility, you can appoint a managing company to oversee the building’s maintenance. This can be expensive and the shareholders will be responsible for paying them, but it can prevent disputes and means that none of the freeholders have to dedicate their time to making sure any issues are resolved.
How do I extend my lease on my share of freehold property?
Usually, to extend a lease, you would generally serve a Section 42 notice onto your freeholder and work out a premium based off of a formula set out in the Leasehold Reform Act 1993.
However, if you own a share of the freehold, you would need to obtain an informal lease extension by negotiating with your co-freeholders. You will need their consent for the share of freehold lease extension (and they will also need yours when they want to extend their leases) and you will need to negotiate with them how much you will pay as a premium – although, many co-freeholders choose not to charge each other any premium at all in order to keep the lease extension process cheap for everyone.
Informal Lease Extensions are also available to leaseholders who do not own a share of the freehold.
- You have to pay for the maintenance work– Unfortunately, with the control over maintenance comes the cost. You and the other shareholders should discuss how costs for maintenance will be split between you all, but you will still have to pay for it. However, the service charge for smaller, self-owned blocks will likely be smaller at least, especially if the shareholders live in the property full-time.
- You will still have to consult your landlord over major works– If you want any work done which will significantly change the property, you will still have to obtain your landlord’s consent before any of the work can proceed.
- You need the other owners to sign the freehold’s transfer if you want to sell your flat– Should you wish to sell your share and move out of your flat, you will need the signature and two pieces of ID from each other shareholder for the land registry. With everyone leading such busy lives, this can be difficult if the other shareholders are away for long periods of time, which may be an issue if you are required to exchange contracts over a short time period for your new property. However, we at Starck Uberoi can help alleviate this risk – see Online Conveyancing Solicitors to find out how we can keep the conveyancing process moving swiftly no matter where you are.
- You may be required to complete administrative work– Some of your obligations when owning a share in a freehold property may include administrative tasks such as annual returns for the company that owns the freehold. Not only can this be time-consuming for you, but you will be held liable for any fines and reinstatement fees should you make any mistakes and the should the company be struck off.
How Starck Uberoi can help
Our conveyancing solicitors have vast experience helping people who own a share of the freehold and our mortgage advisors can also provide mortage advice for share of freehold and leasehold property.
We have Law Society Accreditation under the Conveyancing Quality Scheme (CQS) in recognition of the excellent standard of conveyancing service we offer. We take a client-focused approach dedicated to making the conveyancing process as quick and easy as possible, such as by using the Starck Uberoi app and offering a comprehensive no-obligations online conveyancing quote for our clients’ convenience. We are also trusted conveyancers on the lender panels for the majority of high street lenders including Barclays, Halifax, HSBC, Nationwide, NatWest and Santander.
For more information, please see our conveyancing pages. To book an appointment, please call 020 8840 6640 email solicitor@starckuberoi.co.uk.
Our conveyancing solicitors in Brentford act for buyers and sellers across west London, as do our conveyancing solicitors in Ealing. We also handle property work from our Belgravia office, our conveyancing solicitors in Pinner, our Richmond office and our Canterbury office.
Our partner, Raminder Uberoi, can also provide a Notary Public Service at any of our London offices.
