"Share of freehold" is one of those terms that you might come across in the property market. It is linked to properties that include elements of both leasehold and freehold tenures. Understanding what share of freehold means is crucial for making informed decisions.

What Does Share of Freehold Mean?

Owning a share of freehold means you hold the leasehold of your individual property and a share of the freehold for the entire building and the land it occupies. This arrangement is commonly associated with flats, where each owner possesses the leasehold for their unit and collectively owns the freehold for the building and land.

Managing Share of Freehold

There are two primary methods for managing a share of freehold: joint management and a management company. Regardless of the method, you maintain your share of the freehold.

Limited Company Share of Freehold

In cases where more than four freeholders are involved, creating a private limited company is often the best approach. The company is registered as the freehold owner, with you and other co-owners as shareholders and directors. This method involves adhering to company law procedures as part of your homeownership responsibilities. Sometimes, it might be practical to appoint one occupant as the company director, while the rest remain shareholders.

Share of Freehold in Personal Names

Also known as "tenants in common," this method involves each owner holding an equal percentage of the freehold. For example, if there are four owners, each would have a 25% share. This arrangement operates based on trust and may involve fewer administrative fees than a limited company. However, it can be riskier due to the personal nature of the agreement.

Leasehold vs. Share of Freehold

The primary distinction between leasehold and share of freehold is ownership. With a leasehold, you own the lease of your property for a set term (usually decades or centuries) but pay ground rent to the freeholder, who owns the building and land. In contrast, owning a share of freehold means you have a portion of the freehold in addition to your leasehold interest.

Benefits of Share of Freehold

Owning a share of freehold offers several advantages:

• Enhanced Control: You have a direct say in the management and upkeep of the property.
• Property Maintenance: With shared ownership, all occupants are likely equally invested in maintaining the property to a high standard.
• Cost Savings: Typically, you will pay lower or no ground rent and enjoy lower service charges due to internal management.
• Lease Extension: You can extend your lease up to 999 years at no additional cost, avoiding the depreciation associated with shorter leases.

H3: Drawbacks of Share of Freehold

There are also some challenges to consider:

• Variable Costs: Maintenance charges can fluctuate, leading to occasional high expenses for significant repairs.
• Administrative Burden: Managing the building can be time-consuming and costly if not done correctly.
• Insurance Complications: Arranging home insurance can be more difficult and expensive.
• Rental Restrictions: Renting out your property can be challenging if neighbours are uncooperative or the lease restricts it.

Extending Your Lease

While owning a share of freehold allows you to extend your lease without a premium, all co-freeholders must agree to the extension. If all co-freeholders extend their leases simultaneously, leases can be modernized and updated collectively.

Service Charges and Ground Rent

As a share of freehold owner, you still pay service charges and possibly ground rent. However, these charges are usually fairer since they are determined collectively by the co-owners, ensuring transparency and mutual agreement.

Transferring Share of Freehold

If you decide to sell your property, you can transfer your share of the freehold to the new owner. This transfer requires a formal deed and involves passing ownership from you and your co-shareholders to the new owner and their co-shareholders.

Getting a Mortgage on a Share of Freehold Property

Securing a mortgage on a share of freehold property is possible, though some lenders might view the associated costs as risky. Tips for a successful mortgage application include:

• Long Lease: Ensure the flat has a long remaining lease, as this affects property value.
• Management Company: Check if there is a well-established management company in place.

Keep in mind that only certain lenders offer mortgages for share of freehold properties, and you might need a higher deposit or face higher interest rates.

Let Darlows Help You with Your Next Move

If you are considering purchasing a property with a share of freehold, Darlows’ experts are here to help. We have the knowledge, skills and experience to make your property search as smooth as possible. Contact your local Darlows branch today and let us assist you with your next move.