What Is Share Of Freehold? Your Complete Guide

Are you considering buying a property and stumbled upon the term "share of freehold"? Wondering what it actually means and how it might affect your homeownership journey? Let's delve into the intricacies of shared freehold, its pros and cons, and whether it's the right choice for you.

What does share of freehold mean?

Essentially, when you purchase a property with a share of freehold, you're not just buying the leasehold of your individual unit; you're also acquiring a stake in the freehold of the entire building and the land it occupies.

This arrangement is most commonly associated with flats, where each owner holds the leasehold for their flat and collectively shares ownership of the freehold for the entire building, forming a tight-knit community of homeowners. There are two main ways this is managed: through joint management or via a management company. Regardless of the approach, you still have a share of the freehold, giving you a voice in decisions affecting your property.

Management company

If you find yourself part of a building with more than four freeholders, establishing a private limited company can be a prudent move. This company essentially assumes the role of the freehold owner, with each owner being duly registered as a shareholder and director.

This arrangement not only streamlines decision-making processes but also ensures a structured approach to managing the property.

Joint management

Alternatively, you can hold the freehold in individual names, with each owner having an equal percentage share. This method, known as "tenants in common," simplifies things in terms of administrative overhead and legal complexity. However, it relies heavily on trust among owners, as there is no formal company structure in place to manage disputes or decision-making. This approach may be suitable for smaller properties with a limited number of owners who have a strong existing relationship and a high level of mutual trust.

Leasehold vs. share of freehold

In leasehold arrangements, you're essentially a tenant, holding only the lease to your property. The ground rent you pay typically covers the cost of maintaining common areas, such as gardens or communal spaces, as well as contributing to the overall upkeep of the building. However, with a share of freehold, you step beyond the role of a tenant. You become a co-owner of the building's freehold, alongside your individual leasehold. This means you have a stake in the entire property, including the land it stands on and the airspace around it.

Pros and cons of share of freehold

Owning a share of freehold comes with perks and pitfalls. On the bright side:

You have a say in property decisions.
You may enjoy a higher standard of property maintenance.
You pay low to no ground rent.
You can extend your lease without extra cost.
You may enjoy potentially lower service charges.

However, there are challenges too:

Maintenance costs can vary.
Managing the building takes time and effort.
Insurance can be pricier.
Renting out your property might be tricky.

Extending share of freehold

Extending your lease is possible, but it requires cooperation from your co-owners. While they're not obligated to extend simultaneously, doing so can streamline the process and modernize all leases.

Navigating service charges and ground rent

Even with a share of freehold, you'll still chip in for service charges and ground rent. But fear not; since you are part of the decision-making process, unfair charges are less likely.

Transferring ownership

When selling your property, you can transfer your share of freehold to the new owner through a formal deed. This ensures a smooth transition of ownership among all shareholders.

Getting a share of freehold mortgage

You can secure a mortgage on a share of freehold property. Some lenders may be cautious due to potential costs, but with the right approach, you can find a suitable deal. Look for properties with lengthy leases and established management companies for smoother transactions.

Practical management tips

Managing a shared freehold property requires effective communication and cooperation among co-freeholders. Here are some practical tips for managing your share of freehold property successfully:

Establish clear lines of communication: Maintain open and transparent communication with your co-freeholders to ensure that everyone is on the same page regarding property management decisions.
Create a maintenance schedule: Develop a schedule for regular maintenance tasks, such as cleaning common areas, servicing utilities, and conducting inspections. This can help prevent issues from arising and ensure that the property remains in good condition.
Set a budget: Create a budget for ongoing maintenance and repairs, taking into account factors such as service charges, insurance premiums, and reserve funds. This can help you manage expenses more effectively and avoid financial strain.
Seek professional advice when needed: If you're unsure about any aspect of property management, don't hesitate to seek advice from legal or financial professionals. They can provide guidance and support to help you navigate complex issues and make informed decisions.

By following these practical management tips, you can ensure that your share of freehold property is well-maintained and that any potential issues are addressed promptly and efficiently.

Let Felicity J. Lord guide you

If share of freehold properties feel daunting, don't fret. At Felicity J. Lord, we specialize in navigating the intricacies of London's property market. Our experts are here to simplify the process and help you make informed decisions. Ready to embark on your property journey? Let us guide you every step of the way.