Share of Freehold: Common Questions and Answers

A share of freehold means that, in addition to owning your leasehold property, you also hold a share in the freehold of the building. This arrangement gives you more authority over the building’s management and maintenance. It also provides greater flexibility for extending or altering the property, subject to planning permission and compliance with building regulations.

There are two primary ways to structure a share of freehold:

1. Direct Ownership of the Freehold by Flat Owners
   Up to four flat owners can directly own the freehold in their personal names. These owners act as trustees, and in some cases, a declaration of trust deed is required to avoid disputes about financial contributions for the property’s upkeep.
2. Freehold Ownership Through a Company
   In this setup, a company owns the freehold, and residents either purchase shares in the company or acquire their share as part of their property title. This is the most common arrangement for share of freehold properties.

The share of freehold system was created to improve the management and upkeep of communal areas within buildings. When flats in a block are all individually freehold, managing shared responsibilities can become complicated. By granting flat owners a share in the freehold, it allows them to collectively manage the building more effectively. This often leads to better-maintained communal spaces, more control over decisions, and potentially lower maintenance costs.

• Greater Control Over Management and Maintenance: Leaseholders who do not own a share of the freehold must rely on their freeholder to arrange maintenance on their behalf. This often results in high service charges and long wait times for simple maintenance tasks. Share of freehold property owners can organise maintenance and buildings insurance themselves or choose their own agents to handle these tasks, giving them greater freedom.
• Ability to Extend Your Lease more cost effectively: The cost of a lease extension is rarely less than £1,000, and the shorter your lease, the higher the premium your freeholder can charge. Share of freehold owners can decide on the premium among themselves and can choose not to charge any premium for the lease extension at all. You can extend your lease by up to 999 years, so you’ll never have to worry about extending your lease again.
• Flexibility to Make Alterations to Your Property: With leasehold ownership, the lease may restrict what alterations or extensions can be made to the property. Typically, if the lease contains a restriction on alterations, the leaseholder would need to ask their freeholder to grant them a licence for alterations or possibly agree to amend their lease. Owning a share of the freehold gives the leasehold more freedom to vary their lease themselves.
• Increase in Property Value: Share of freehold properties are typically more valuable than regular leasehold properties. They can increase your property’s value by as much as 10%, according to some property experts.

While share of freehold ownership can offer greater control and flexibility, it does come with some downsides:

• Responsibility for Arranging Maintenance and Building Insurance: Since the owners collectively own the freehold, they are responsible for the management and maintenance of the entire building. This means they need to organise repairs, arrange building insurance, and deal with any disputes between other leaseholders. These tasks can be time-consuming, and owners can be held responsible for any issues that arise because of these tasks not being done.
• Responsibility for Paying for Maintenance and Building Insurance: While you and your co-freeholders can decide how much is spent on maintenance and insurance, the bill will ultimately come to you. You and your co-freeholders will need to decide among yourselves how the costs will be shared.
• Possibility of Disputes Between Share of Freeholders: Owning a share of freehold property doesn’t give you unopposed control over the entire building. When it comes to varying or extending leases, arranging maintenance, and building insurance, share of freehold owners need to make decisions jointly. If you fall out with any co-freeholders, they may purposefully make things difficult for you when you want to extend or vary your lease

The responsibility for maintenance falls to all those with a share in the freehold. Conflicts may arise over what needs to be done, which can be settled in court if necessary. Alternatively, you can appoint a managing company to oversee maintenance, although this can be expensive.

Owning a share of freehold does make the conveyancing process a bit more complicated. When you sell a leasehold property, the LPE1 form (the Leasehold Property Enquiries form) needs to be completed by the freeholder. If you own a share of freehold property and want to sell, the LPE1 form will need to be completed by all the co-freeholders. Additionally, you will need to obtain consent from the other freeholders in order to sell your share of freehold property. Whoever buys your share of the freehold will also receive the benefits and responsibilities of share of freehold ownership, so the other co-freeholders may want to ensure that whoever is taking your place can be trusted to handle their share of the work. Obtaining consent from the other co-freeholders can make the conveyancing process take longer and possibly even deter a buyer.

Share of freehold is a type of property ownership that can offer greater control and flexibility for flat and apartment owners. However, it comes with additional responsibilities and can be more expensive than leasehold ownership. If you’re considering buying a property with share of freehold ownership, it’s important to understand what it entails and to seek professional advice if necessary.

Yes, you can obtain a mortgage on a share of freehold flat just the same as over a purpose built leasehold flat.

For more information, read our blog Obtaining a Mortgate on Leasehold Property. The UK Finance Lenders Handbook provides a comprehensive guide on what specific lenders require.