What Is Share of Freehold?

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Buying a property can involve more than simply choosing the right home and agreeing on a price. If you are looking at flats or apartments, you may come across the term share of freehold. Cheltenham estate agents can help buyers understand what this arrangement means and how it differs from a standard leasehold property. While the term may sound complicated, the basic idea is fairly straightforward once you understand how ownership is structured. 

What Does Share of Freehold Mean?

A share of freehold means that you own your individual property as a leasehold, while also owning a share of the freehold of the entire building or development. 

For example, imagine a building containing six flats. Each flat may have its own lease, but the six flat owners collectively own the freehold of the building. This could be arranged through a company, with each owner holding a share in that company, or the owners may be named as joint freeholders. 

This is different from a standard leasehold arrangement, where another person or organisation owns the freehold and the leaseholder has the right to occupy their property under the terms of their lease. 

How Does Share of Freehold Work?

When you buy a flat with a share of freehold, you normally purchase two connected interests. The first is the leasehold ownership of your individual flat. The second is your share of the freehold ownership of the building. 

The lease remains important because it sets out the rights and responsibilities associated with your property. It may cover matters such as alterations, maintenance, subletting, pets and the use of communal areas. 

As a freeholder, you and the other owners will also have a role in making decisions about the building. Depending on how the freehold is structured, this might involve arranging buildings insurance, organising repairs and maintaining communal areas. 

What Are the Benefits?

One of the main attractions of a share of freehold is having greater control over the building. Rather than relying entirely on an external freeholder, the property owners can have a direct say in how the building is managed. 

There can also be greater flexibility when it comes to extending leases. A short lease can make a property less attractive to buyers and can sometimes create difficulties when arranging a mortgage. Having a share of the freehold can make the process of extending the lease more straightforward because the leaseholders collectively have control over the freehold. 

Another potential advantage is having more influence over service charges and maintenance decisions. The owners can collectively decide how communal areas and shared parts of the building should be maintained. 

Are There Any Disadvantages?

Share of freehold does not mean that you own your flat outright without a lease. This is an important point for buyers to understand. 

You will still need to check the length and terms of the lease before buying. A lease with a relatively short remaining term can still cause problems, even if you own a share of the freehold. 

Managing the freehold can also involve additional responsibility. Owners may need to agree on repairs, insurance, maintenance and other expenses. If the owners disagree about how the building should be managed, decisions can sometimes become difficult. 

The structure of the freehold also matters. You should establish whether the freehold is owned directly by the flat owners or through a management company and understand what responsibilities come with your share. 

Does Share of Freehold Mean There Is No Service Charge?

Not necessarily. A property with a share of freehold can still have service charges. 

Communal areas, roofs, external walls, gardens, lifts and other shared facilities all need to be maintained. The owners will normally need to contribute towards these costs. 

However, the way the costs are managed may differ from a traditional leasehold property. In some buildings, the owners collectively manage the expenses themselves. In others, a managing agent may be appointed to handle maintenance and administration. 

It is therefore important to ask for information about recent service charges and any planned major works before buying. 

What Should You Check Before Buying?

If you are considering a property with a share of freehold, there are several things worth checking during the buying process. 

Start by finding out exactly what you are purchasing. Your solicitor can explain whether you are receiving a direct share of the freehold or a share in a company that owns the freehold. 

You should also check the remaining length of the lease and carefully review its terms. Look at the service charge arrangements, ground rent, buildings insurance and responsibility for repairs. 

It is also sensible to ask whether there are any planned major works. A large repair project, such as replacing a roof or carrying out external renovations, could result in significant additional costs for the owners. 

Finally, find out how the freehold is managed and whether there are any existing disputes between the owners. 

Is Share of Freehold Better Than Leasehold?

There is no simple answer because it depends on the property and the terms involved. 

A share of freehold can provide greater control and may make lease management easier. However, it also means taking on responsibilities alongside the other owners. 

The quality of the lease, the condition of the building, service charges and the way the freehold is managed can all be more important than the label itself. 

Before making an offer, buyers should look beyond the phrase “share of freehold” and understand exactly what they will own and what responsibilities they will have. 

Final Thoughts

Share of freehold can be an attractive arrangement for flat owners because it gives them a direct interest in the freehold of the building. It can provide greater control over management and may make lease extensions easier to deal with. 

However, it does not remove the need to understand the lease or the financial responsibilities associated with maintaining the building. If you are considering buying a property with a share of freehold, getting professional legal advice and checking the lease and freehold arrangements carefully can help you make an informed decision.