Is It Hard to Sell a Freehold Flat?

There are lots of different types of property throughout the UK.

Flats are the most common kind. They can be divided between ‘leasehold’ and ‘freehold’ flats.

In this blog, we’ll explain what a freehold flat is and whether it is difficult to sell one.

What is a freehold flat?

A freehold flat is a property in which the owner owns both the flat and the land on which it is built.

This person will be responsible for maintaining the apartment and the land.

Many people avoid buying a freehold flat because many lenders do not offer mortgages on these properties.

Let’s explore this further.

Freehold flats and share of freehold flats are often confused.

The latter means that the freehold is collectively owned by the leaseholders, who each own their leasehold property.

(See below for more on share of freehold)

How common are freehold flats?

Freehold flats are rare, especially since almost all lenders do not accept an application to purchase one.

This is because the flat is part of a larger building, making it difficult to confirm who is responsible for what.

It is far more common to own the freehold for a detached property (almost all detached houses are).

A share of freehold is when several people within an apartment building own a share of the land it’s built on.

This arrangement gives the people living there a relatively high level of power. They can control the management and maintenance of the property, as well as extend or alter it.

Similarly, this also makes leasehold terms easier to extend.

Two primary methods of owning a share of freehold are through ‘joint management’ or a company.

Is it hard to sell a freehold flat?

Yes, it is difficult to sell a freehold flat because most banks do not offer mortgages on them.

Instead, you will need to find a cash buyer willing to purchase it, as they can do so without relying on a mortgage.

When you sell a freehold flat, you will typically receive much lower than the market price if it was a regular ‘leasehold’ flat.

This is because there are legal complications involved, which the new owner will be taking on.

Advantages of owning a freehold flat

There are a few advantages to owning a freehold flat, but these are minimal.

Firstly, you won’t need to negotiate to extend your lease from the freeholder – because you are the freeholder.

You typically won’t need to pay a service charge, which can save you a considerable amount each year.

You also won’t pay ground rent (although this would be a very low ground rent anyway).

Disadvantages of owning a freehold flat

Freehold flats are notoriously difficult to sell because lenders won’t offer mortgages on them.

You will therefore need to find a cash buyer, which requires going to either a cash buying company, selling at auction, or contacting one directly.

Owning the freehold of a flat comes with legal, administrative, and (sometimes) financial obligations.

As mentioned further above, it can also be challenging to determine who is responsible for what (about specific walls, shared areas, doors, etc.). This is because there are no leases that outline this.

Since freehold flats are uncommon and rarely discussed, potential buyers may need clarification about this.

Why do lenders not give a mortgage on freehold flats?

Although banks sometimes have different reasons for not offering mortgages on freehold flats, there are a few commonly agreed-upon explanations.

Firstly, the owner of a freehold flat has no legal obligation to maintain the building. This means the bank cannot be sure their mortgage is safe because the building may fall into disrepair.

Secondly, it is common for disagreements to involve freehold flat owners, especially since it is difficult to ascertain which parts of the building belong to whom accurately.

If the flat is ever sold, future freeholders may not agree to existing arrangements.

Lastly, there is concern over the ability to resell the house further down the line since this property type is uncommon and has several drawbacks.

Which lenders will give a mortgage on freehold flats?

Yes, freehold flat mortgages are possible. However, only a few lenders will consider this type of property.

You should speak to banks directly to find out if they are willing to give a mortgage on this property type. Smaller, less well-known lenders may be the only ones that do so.

How quickly can I sell a freehold flat?

Reliable cash buying companies are committed to purchasing any type of property.

If everything goes smoothly, we can buy your freehold flat within two weeks and deposit the funds in your account immediately.

Remember that you will receive a below-market offer for this property due to its difficulty in selling.

Can I sell a freehold flat at auction?

Yes, you can usually sell a freehold flat at an Auction House. This is the ideal place for any atypical properties – although you may not receive the highest price.

You should speak to the auction house in advance about the listing to ensure it is a viable option for selling it.

As outlined above, a share of freehold property is totally different. These are more common in the UK compared to freehold flats, but are still not found in many places.

That said, you can get a mortgage on a share of freehold, meaning you may encounter this property type on the open market.

A major benefit of owning a share of freehold property is the option to extend your lease for a maximum of 999 years.

However, new government legislation will introduce this for all leaseholders in the coming years.

Lease extension costs are usually lower with a share of freehold, too.

Another advantage is that repairs and maintenance are usually more cost-effective, and you can have greater control over what is/isn’t done in the communal areas.

On the other hand, owning a share of freehold typically involves a more significant maintenance cost, as you are responsible for these payments yourself rather than a management company.

You will also need to navigate organising a freehold transfer in some circumstances, which requires coordination, negotiation and administrative paperwork.

You should consult a legal expert for guidance with these tasks.