What Does Share of Freehold Mean?

Share of freehold is a common term that confuses many new buyers of flats.

Keep reading our blog below to find out what it means and whether it could make your life easier.

Share of freehold means that the land underneath a property is collectively owned by a group of people rather than one individual.

This gives these people more power and control over ground rent, maintenance and lease extensions.

Many homeowners consider having a share of freehold a good thing. Others feel it involves increased responsibility and hassle that they don’t want.

And if you don’t want to deal with your portion of the freehold yourself, you can hire a managing agent to look after it.

A share of freehold can be structured in two main ways:

In personal names
As a limited company

It is common for flat owners to form a limited company and own the freehold collectively.

This can be useful because it clearly defines the roles, rights, and responsibilities of everyone involved.

This option is widespread if members of the same family collectively own a share of the freehold.

It can also work when more than four people are involved, as this tends to make the decision-making process more complicated.

When you own a share of freehold, this can sometimes remove the need to pay ground rent. But in other cases, the shared freeholders may still agree to pay a small amount.

It depends on the circumstances.

If you don’t own part of the freehold, costs such as ground rent can inflate enormously. It’s beneficial to keep a cap on this price and ensure it stays high.

Yes. If someone decides to sell their share of freehold, it can be transferred to a new owner.

If the share of freehold is owned as part of a limited company, a new shareholder can be brought in, with the previous one going in the opposite direction.

Speak to a qualified legal expert if you need more guidance.

You can ask your freeholder to purchase the freehold at any time.

Furthermore, if that same freeholder decides to sell the freehold, they are supposed to give you (the leaseholder) first refusal.

To buy a share of the freehold, you must meet certain criteria. For example, at least half of the flats in the building must be interested.

If you meet all the criteria to purchase it, you should bring in a surveyor who can estimate its cost.

Remember that the shorter the lease length, the more expensive it is to purchase the freehold.

You will also need the support of a solicitor to handle paperwork, such as signing a participation agreement.

The UK government is currently aiming to introduce new measures regarding this subject.

These include making it more affordable to purchase a freehold or even eliminating the concept of ‘freeholders’ completely.

Keep an eye on any new legislation that is passed to stay up to date with this.

Yes, if you are gathering with the other leaseholders to buy a share of the freehold, it is strongly recommended that you bring in a solicitor to help.

There are several administrative tasks around this. Here are just four of them, for example:

Submitting your formal request to the freeholder
Negotiating on price
Transferring the funds
Signing a participation agreement

You could handle it independently with prior legal experience (and adequate free time). Otherwise, having a professional by your side could make all the difference.

Advantages

A share of freehold gives you a high degree of control over your property and its associated costs.

There are countless tales of leaseholders being unhappy with the fees they are paying or the lack of maintenance throughout the building.

By taking ownership of this process, you can guarantee that maintenance is taking place and that the fees are reasonable.

As a second advantage, buying a share of your freehold can provide peace of mind that you won’t be kicked out of your flat at the end of the term.

Disadvantages

On the other hand, you will need to pay an additional fee for a solicitor to support you with this process.

Buying the freehold itself will also cost money. Make sure you have saved up for this amount and that the other people involved are chipping in, too.

You still have a lease even if you buy a share of the freehold. You will also have to continue collaborating with the other people involved. This can sometimes lead to disagreements as the years go by.

There is no guarantee that buying a share of the freehold will result in a major increase in the property’s value.

As mentioned above, some people view it as an unwanted hassle, so you may not get an immediate return on your investment.

Leasehold reform is currently a hot topic in the UK, meaning that legislation may be due to change in the next few years.

You should keep an eye on developments in parliament to see how this affects you.

Before you act on this idea, it is worth speaking to the other leaseholders in the building informally.

A hefty up-front fee is involved, and most people will need help to afford this. If you are all passionate about it, then an advance notice will be required so everyone can save up for the agreed amount.

You should also consider your long-term plans. If you want to live in your current property long term, then taking ownership of your freehold can be very important.

However, if you are due to sell the property soon, it probably isn’t worth the cost and effort. After all, it won’t necessarily result in an immediate increase in property value.

Your current freeholder

The behaviour of your current freeholder will likely influence your decision.

For example, they may be unreasonable about lease extensions or keeping service charge fees extremely high.

In these cases, it might be worth buying a share of the freehold.

Keep an eye on legal developments in this area. The UK government has indicated that leaseholders will be given more power in upcoming legislation.