What Does Share of Freehold Mean?

Shared ownership is quite common in the UK.

Joint tenancies or tenants in common are both popular but different forms of it.

And another way of joining forces with someone else is getting a ‘share of freehold’.

But what does share of freehold mean? And what are the advantages and disadvantages of it? Read on to find out.

Share of freehold is when a group of individuals collectively owns a property’s freehold.

It is common in the UK for buildings with several flats in them. The leaseholders may negotiate to buy the land underneath the property from the freeholder.

The freeholder may set certain conditions for the sale of the freehold. They will decide on a price to sell it for. Solicitors’ fees are also often an extra cost for the leaseholders.

One alternative ownership model to share of freehold is commonhold.

The latter is similar to the former, however, commonhold provides more individual ownership and flexibility for owners, who each own their own unit. By contrast, freehold offers a more collective approach to ownership and management.

How are shares of freehold managed?

There are two main ways that a share of freehold can be managed.

Joint management

The share of freehold owners jointly manage the property themselves.

When the share of freehold is owned by joint management (in the leaseholders’ names), it comes with limitations.

A maximum of 4 people can jointly hold the freehold in this way. This makes it ideal for smaller buildings.

However, a management company might be better with larger blocks of flats.

A managing agent can be appointed if share of freehold owners don’t want to manage the property personally.

Forming a management company

The company’s rules can also clearly define the rights and responsibilities of everyone involved.

Shares can be traded when someone leaves the block and a new person moves in.

To get a share of freehold, a group of leaseholders will usually approach the landlord about buying the freehold. The landlord will consider this and state their response.

LEasehoilders should get legal help during this process. They may be entitled to ‘Collective Enfranchisement’, meaning the landlord cannot refuse.

Negotiations on price may follow this. All leaseholders should agree on a budget.

Once the landlord agrees, the leaseholders need to choose which of the two methods of ownership works best (joint management or forming a management company).

Where to find shares of freehold

There are ways to find a share of freehold property. You should ask estate agents in your area if they have any listed.

You could also use online platforms such as Rightmove and Zoopla. Properties will be listed as share of freehold on there when it is applicable.

Searching through Companies House might reveal management companies operating in your area.

This can signpost you towards the nearby blocks owned as a share of freehold.

1. Control

Share of freehold gives you greater levels of control over your property. You and the other co-freeholders can dictate service charges.

2. Cost-effective

You will also be able to pay careful attention to all maintenance going on in the property. This ensures that everything is on budget and on time.

You can get rid of ground rent by taking over the share of freehold. This is a recurring expense in leasehold properties that you’ll now avoid.

You also have plenty of freedom when the time arrives to extend your lease. It is much easier to do this and far less costly.

3. Simpler processes

You only need permission from the other people involved in the share of freehold. Your stress will be reduced, along with your costs.

4. Property value increases

This latter point has a positive knock-on effect on your flat’s value. Properties with long leases are generally more valuable.

And many people also prefer to live in a flat with a share of the freehold. It is a win-win.

5. Property condition increases

When the share of freehold is handled correctly, it results in a better property condition.

You and the other freeholders can guarantee that the building is looked after correctly. Problems will be addressed, which means that communal areas will improve.

1. Time-consuming

Share of freehold is often more time-consuming. You need to think about repairs, budgeting and lease extensions yourself.

Regular meetings may be necessary with the other freeholders. You’ll need to find time for these things in your schedule.

2. Potential costs

Any mistakes you make are costly to rectify. You may, therefore, prefer to have a legal expert supporting you at all stages. This can increase your costs too.

It is often reported that you will experience greater difficulty and expense regarding home insurance.

3. Potential conflict

When neighbours fall out, it can be awkward for all parties, particularly if the neighbours are also joint freeholders.

Clashes in personality often make it challenging for decisions to be made. One person dragging their heels can be slow and stressful.

4. Selling issues

It is often reported that you will experience greater difficulty and expense regarding home insurance.

Only some potential buyers are attracted to the idea of share of freehold. Some people want to avoid the hassle.

So, while some people will see your property as a great option, others might turn away.

Yes, plenty of lenders will give you a mortgage on a share of freehold.

However, they will want clear information about all circumstances surrounding the share of freehold.

This includes the number of people involved, the time its been in place, the valuation of your property and so on.

Not all lenders will do this, so you should shop around.

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What Does Share of Freehold Mean?