If you’re currently looking to purchase a flat or apartment, you might have encountered the phrase “share of freehold” in your property hunt. What does this term signify, and how is it distinct from owning a property on a leasehold or freehold basis? This blog post will delve into the concept of share of freehold and explore its implications for property owners.
Share of freehold is a form of property ownership specific to flats and apartments in the UK. Owners not only possess their individual leasehold units but also share ownership of the building’s freehold. This arrangement grants them enhanced control over the building’s management and upkeep, and the flexibility to modify or expand their property, provided they comply with planning permissions and building regulations.
Leasehold is the predominant form of property ownership for flats and apartments in the UK. Under this system, leaseholders own their property for a set period, typically 125 years, as stipulated in their lease, while a separate freeholder owns the land on which the property is built. The freeholder is tasked with the maintenance and insurance of the building’s exterior and communal areas, such as stairwells and hallways.
Conversely, in a share of freehold arrangement, the freehold of the property is jointly owned by the leaseholders. Each leaseholder also owns their own individual leasehold property. This collective ownership provides them with greater control over the property’s management and maintenance and the freedom to make extensions or modifications.
The advantages of owning a share of freehold property include:
- Enhanced Control Over Property Management: Leaseholders without a share in the freehold often depend on the freeholder to manage maintenance, which can lead to high service charges and delays in basic upkeep. Owners of share of freehold properties, however, have the autonomy to manage maintenance and building insurance directly or select their own agents for these tasks, offering them increased independence.
- Cost-Effective Lease Extensions: Extending a lease typically costs no less than £1,000, with costs escalating as the lease shortens. In contrast, share of freehold owners have the flexibility to set their own terms for lease extensions, potentially eliminating the premium entirely. Additionally, they can extend their leases up to 999 years, removing future concerns about lease renewals.
- Flexibility for Property Modifications: Leasehold properties often come with restrictions on modifications that can be made, requiring leaseholders to seek permission for alterations or amendments to their leases. Share of freehold ownership provides leaseholders with greater freedom to alter their leases and make property modifications without requiring external approval.
- Potential Increase in Property Value: Properties with a share of freehold generally hold higher market value than standard leasehold properties, potentially increasing in value by as much as 10%, as noted by some property experts.
While share of freehold ownership offers increased control and flexibility, it also presents certain challenges:
- Obligation for Maintenance and Insurance Management: As co-owners of the freehold, you are tasked with the building’s overall management and maintenance. This includes organising repairs, arranging building insurance, and resolving disputes among leaseholders. These responsibilities can be time-consuming and you may be held accountable for any issues that arise from these tasks not being handled properly.
- Financial Responsibility for Maintenance Costs: Although you and your fellow co-freeholders have the autonomy to determine expenditure on maintenance and insurance, the financial responsibility ultimately falls on you. Deciding how costs are split among yourselves can sometimes be complex.
- Potential for Disputes Among Co-Freeholders: Owning a share of freehold does not grant unilateral control over the building. Decisions regarding lease modifications, maintenance, and insurance must be made collectively. Disagreements among co-freeholders can complicate these decisions, especially if relationships among owners deteriorate, potentially leading to deliberate obstruction when you seek to extend or vary your lease.
Selling a share of freehold property is generally straightforward and can often be more valuable than its leasehold counterparts. Properties with shared freehold often boast prime locations and are more affordable than full freeholds, yet free from the constraints imposed by a separate freeholder.
However, the process of conveyancing can be somewhat more complex with a share of freehold. In the case of leaseholds, the LPE1 form (Leasehold Property Enquiries form) must be filled out by the freeholder, who typically has exclusive access to necessary information. For those selling a share of freehold, this form must be completed by all co-freeholders instead.
Moreover, the sale of a share of freehold requires the approval of the other freeholders. The new owner will inherit the rights and duties associated with shared freehold ownership, prompting the other co-freeholders to ensure the new member is capable of managing their responsibilities. This requirement for approval can extend the conveyancing timeline and may deter potential buyers.
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.
This will vary based on the terms specified in the leases. If a particular lease explicitly states that the loft is part of that leaseholder’s property, then the loft space remains under the ownership of that leaseholder. Conversely, if the loft is owned by the freeholder or designated as a communal area, then it falls under the ownership and maintenance responsibilities of the freeholders.
This principle also extends to gardens and roof spaces.
Owning a share of freehold provides flat and apartment owners with more control and flexibility, but it also involves more responsibilities and might cost more than a leasehold. If you’re thinking about purchasing a property with a share of freehold, it’s crucial to fully comprehend what this entails and to consult with experts when needed.
Our team of leasehold solicitors is well-versed in a wide variety of leasehold property issues, including share of freehold conveyancing and resolving conflicts among co-freeholders. Contact us today for any information you require.
How DLS Solicitors can help
For share of freehold property transactions, it is essential to engage with solicitors who are well-informed and dependable. At DLS Solicitors, we keep abreast of the latest property law developments and make certain that all inquiries are thoroughly addressed, allowing us to maintain a high level of service even in complex situations.
