Share of Freehold: Meaning, Benefits, and Key Considerations for UK Homebuyers
Understanding property ownership structures is crucial when buying a home in the UK. Share of freehold offers unique advantages over traditional leasehold arrangements, but it also comes with its own set of responsibilities and considerations.
What is Share of Freehold?
A share of freehold refers to a property ownership structure where leaseholders in a building (typically flats) collectively own the freehold of the entire property. This arrangement grants them control over the building management, maintenance, and lease terms, unlike traditional leasehold arrangements where an external landlord holds the freehold.
Key Features:
- • Joint Ownership: Each leaseholder owns a share of the freehold
- • Combined Rights: Retain leasehold for individual flat plus stake in the building freehold
- • Legal Structure: Managed via company or as tenants in common
Share of Freehold vs. Leasehold: Key Differences
| Aspect | Share of Freehold | Leasehold |
|---|---|---|
| Ownership | Co-own the freehold with other leaseholders | Own the property but not the land; lease terms are finite |
| Control | Collective decision-making on repairs and charges | Limited control; freeholder sets terms |
| Costs | No ground rent; service charges decided collectively | Ground rent and service charges set by freeholder |
Benefits of Share of Freehold
Greater Control
Co-owners decide on maintenance, insurance, and budgets, avoiding exploitative fees from external landlords.
Cost Savings
Eliminate ground rent and negotiate service charges directly with other owners.
Lease Flexibility
Extend leases to 999 years at minimal cost, enhancing property value.
Increased Marketability
Properties with share of freehold often sell 10–15% higher than leasehold equivalents.
Challenges to Consider
Management Responsibilities
Owners must handle repairs, insurance, and legal compliance (e.g., filing annual returns).
Potential Disputes
Decision-making requires consensus; disagreements among co-owners can stall projects.
Mortgage Hurdles
Some lenders view share of freehold as risky due to potential mismanagement.
How to Obtain a Share of Freehold
Collective Enfranchisement
Leaseholders can band together to buy the freehold under the Leasehold Reform Act 1993.
Purchase with Existing Share
Some resale properties include a share of freehold, transferred during sale.
Private Purchase
Investors can buy freeholds at auctions if existing leaseholders decline their right of first refusal.
FAQs: Share of Freehold
Does share of freehold mean I own the land?
Yes, collectively. You own a portion of the land and building, unlike leasehold where the freeholder retains land ownership.
Can I extend my lease with a share of freehold?
Yes. Owners can extend leases to 999 years without hefty premiums, provided co-owners agree.
Are share of freehold flats harder to sell?
Not necessarily, but the process requires extra paperwork (e.g., LPE1 forms signed by all co-owners).
Final Thoughts
A share of freehold offers autonomy and financial benefits but demands proactive management. For buyers seeking long-term value and control, it is a compelling alternative to leasehold. Always consult a solicitor to review leases, company structures, and legal obligations before purchasing.