What is share of freehold property and what are the advantages and disadvantages?
If you’re in the process of buying a flat or apartment, you may have come across the term “share of freehold” during your property search. But what exactly does it mean, and how does it differ from leasehold or freehold ownership? In this blog post, we’ll take a closer look at what share of freehold means and what it entails for property owners.
What is share of freehold?
Share of freehold is a type of property ownership that applies to flats and apartments in the UK. The property owners own their leasehold property, plus a share of the freehold of the building. This gives them greater control over the management and maintenance of the building, as well as the ability to extend or alter the property (subject to planning permission and building regulations).
How does it differ from leasehold?
Leasehold is the most common form of property ownership for flats and apartments in the UK. Leaseholders own their property for the duration of time listed in their lease (usually for a period of 125 years) while the freehold (the land their property is built on) is owned by a separate freeholder. The freeholder is responsible for arranging maintenance and building’s insurance for the building’s exterior and common areas (such as staircases and corridors). In contrast, share of freehold means that the freehold is collectively owned by the leaseholders, who each also own their leasehold property. This gives them more control over the management and maintenance of the property, as well as the ability to extend or alter it.
What are the benefits of share of freehold?
The benefits of share of freehold property include:
- Greater control over the management and maintenance of the property. Leaseholders who do not own a share of the freehold must rely on their freeholder to arrange maintenance on their behalf, which often results in leaseholders paying high service charges while still having to wait a long time for simple maintenance to be done. Share of freehold property owners can organise maintenance and buildings insurance themselves or choose their own agents to deal with these tasks for them, giving them greater freedom.
- The ability to extend your lease for cheap The cost of a lease extension will seldom be less than £1,000, and the shorter your lease is, the higher the premium your freeholder can charge. On the other hand, share of freehold owners can decide on the premium between themselves and can choose not to charge any premium for the lease extension at all. You can also then 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 that can be made, the leaseholder would need to ask their freeholder to grant them a licence for alterations or possibly agree to amend their lease – alternatively, 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.
Are there any downsides to share of freehold?
While share of freehold ownership can offer greater control and flexibility, it does come with some downsides. These are:
- Responsibility for arranging maintenance and building’s insurance Since the owners collectively own the freehold, they are responsible for the management and maintenance of the entire building. This means that they will need to organise repairs, arrange buildings insurance, and deal with any disputes between other leaseholders. These tasks can take a lot of your time and you can be held responsible for any issues that arise as a result of these tasks not being done.
- Responsibility for paying for maintenance and building’s 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 between yourselves how the costs will be shared between you.
- 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 buildings’ insurance and all over aspects of managing the freehold, share of freehold owners need to make decisions jointly. This means 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.
Are share of freehold properties difficult to sell?
Finding a buyer for your share of freehold property generally shouldn’t be very difficult – in fact, share of freehold properties tend to have a higher value compared to regular leasehold properties. Share of freehold properties come with the better locations and lower price tags (compared to freehold properties) of leasehold property without the limitations of having a freeholder. However, owning a share of freehold does make the conveyancing process a little bit more complicated. When you sell a leasehold property, the LPE1 form (the Leasehold Property Enquiries form) will need to be completed by the freeholder as most leaseholders will not have access to this information. If you own a share of freehold property and want to sell, the LPE1 form will need to be completed by 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 well want to make sure that whoever is taking your place can be trusted to handle their share of the work. Having to obtain consent from the other co-freeholders can make the conveyancing process take longer and possibly even put off a buyer.
Can I buy the freehold of my leasehold property?
You can, as long as at least 50% of the other leaseholders in your building meet the eligibility criteria and agree to purchase the freehold with you. The legal process is called Collective Enfranchisement, which you can read more about on our website.
Who owns the loft space of a share of freehold property?
That will depend on what the leases say. If any individual lease includes ownership of the loft, the loft space will still belong to that specific leaseholder. However, if the loft space belongs to the freeholder or is listed as a shared area, the freeholders will own and be responsible for it. The same applies to gardens and roof space.
Is it worth buying a share of freehold property?
Share of freehold is a type of property ownership that can offer greater control and flexibility for flat and apartment owners. However, it does come 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. Our leasehold solicitors have extensive experience in dealing with a broad range of leasehold property matters, from share of freehold conveyancing to disputes between co-freeholders. Call our team today to find out anything you need to know.
How Starck Uberoi Solicitors can help
When it comes to share of freehold property, it is vital to instruct knowledgeable solicitors who can provide reliable advice. At Starck Uberoi, we stay up to date with developments in property law and ensure that no questions are left unanswered so that we can provide a high standard of service even when dealing with the most complicated matters. To book an appointment, please call 020 8840 6640 or email solicitor@starckuberoi.co.uk.
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