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Share of Freehold: What Does it Mean?

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Leasehold and freehold are terms used in property and for those unsure of their meaning, it can make significant differences to their house purchase or sale.

What if you have a share of the freehold though? How does this change things?

Well, to put it simply, a share of freehold means that not only do you own your property leasehold but also a portion of the freehold for the building the property is in and the land it is on. Typically associated with flats or apartments, it means that residents in a block will each own the leasehold on their flat and a share of the freehold for the whole building and the land it is built on. Collectively owning the freehold outright.

This can still lead to a little confusion though as some people still have a little uncertainty over what the terms freehold and leasehold mean.

What is a freehold?

To perhaps gain a clearer understanding, it may be worth explaining how these terms are different. A freehold relates to the ownership of the property and the land it is on.

What is a leasehold?

A leasehold is different to a freehold in that it means the ownership of the property relates to just the property itself and not the land it is on. Leases can last hundreds of years in some cases.

What does a share of the freehold mean?

As mentioned earlier, having a share of the freehold means that not only do you own the lease on the property but also a portion of the land ownership too. Owning a share of the freehold comes around in two ways. One being through joint management and the other being through a management company. You could also see these referred to as, ‘limited company share of freehold’ or ‘share of freehold in personal names’.

What is a limited company share of freehold?

With this way to manage the freehold, you would in effect be setting up a company that would be registered as the building freehold owner. Between you and other residents, you can create a PLC that would see you registered as directors and shareholders of the newly formed company. With this now being a registered business, you would need to govern it like a proper business and adhere to all the laws relating to directorship. This can get confusing and complicated so in some cases, it is often best to nominate one person as the director and have the others as shareholders.

What is a share of freehold in personal names?

You can see this referred to as tenants in common and this is where you will see that each holder of the freehold has an equal share. This is a more simplified version of the company share option as you will not be required to fulfil the duties of directors. Instead, with an element of trust, the shared interest in the building and land means you can achieve the necessary goals without all the additional work. This type of title can only have four freeholders on it. If there were to be more, the limited company option would have to be used.

Do you pay ground rent on share of freehold property?

Checking the documentation is especially important here. Depending on how the agreement has been drawn up will largely determine what happens with ground rents. It is more than likely that you will still be responsible for some charges relating to ground rent. This comes down to the fact that the property itself is still leasehold. With a share of the freehold being yours though, the fees are unlikely to be high as you will be able to have more say over the property management and negotiate with other property management companies if you feel the costs are unreasonable.

Can a share of freehold be transferred?

If you are looking to move out, you will in effect be selling your leasehold. When this time comes you can transfer your share of the freehold to the new property owner and your co-shareholders.

Can I buy a share of freehold on a leasehold property?

You can buy a share of the freehold on your leasehold property but only once the current freeholder(s) and at least half of the neighbours have granted permission. Before a group of people look to obtain the freehold they must ensure that some eligibility criteria are met:

  • There should be two or more flats in the building
  • At least half the number of flats in the building must be owned by leaseholders that want to take on a share of the freehold
  • Less than 25% of the building should be used for non-residential reasons
  • Long leases must be held by leaseholders living in at least two-thirds of the properties in the block

This means that not all the residents will need to be involved for a share of the freehold purchase to proceed. However, the current freeholder must want to sell or agree to sell before anything proceeds.

Is a share of freehold a good idea?

Depending on your property goals and the work you are willing to put in, a share of freehold can have both positive and negative points. Having a share of the freehold does mean that you and the other shareholders have much better control over repairs and maintenance of the building, you’ll be able to extend leases easier and at less cost, and you will be able to benefit from lower ground rent and service charges.

The positives can be outweighed by the negatives though. Home insurance can be more expensive, and management of the building now falls under your guidance. This can be both tricky and expensive to facilitate. The legal obligations also come with a huge burden of responsibility and accountability. Failing to comply can result in substantial fines.

When it comes to selling, things can get complicated too. Mortgages are harder to obtain on these properties which in turn reduces the number of people able to purchase them. This can then leave you without a sale for much longer than if it was just a leasehold.

That is where companies like SOLD.CO.UK come in. As leading online estate agents we strive to complete sales quickly. With no fees, no commission, and a fully managed sales process, our team guarantee you can sell your house for free. Selling faster than any UK estate agent, we make it easy to sell, regardless of your property type. With the ability to buy your house for cash today, it has never been easier to get it SOLD.

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