Share of freehold: what does it mean?

Owning a home often means navigating the complexities of leasehold versus freehold ownership. But there’s another type of property tenure that offers a unique blend of both – the share of freehold.

This setup allows flat owners to hold individual leasehold interests in their buildings, while collectively owning the freehold of the entire building and land it sits on.

However, with owning a share of freehold comes added responsibilities for maintenance, finances, and group decision-making.

We’re going to break it all down here.

With a share of freehold, you own your individual property on a leasehold basis, but you also jointly hold the freehold of the entire building and the land it sits on. This setup typically applies to blocks of flats or apartments.

So, in simple terms – you have your own leasehold flat, but you also have a shared ownership stake in the freehold alongside the other flat owners in the building.

Here’s a quick definition of a freehold and a leasehold just to make things clear:

What’s a freehold property?

A freehold means you own the property and the land outright.

What’s a leasehold property?

A leasehold means you have a long-term lease contract to occupy the property, but the freeholder of the building maintains owners of the land. 

You’ve heard the terms leasehold and share of freehold tossed around. But what’s the real difference?

With a standard leasehold, you’re essentially a long-term renter. You get to live in and make your property your own for decades or centuries based on the lease length. But at the end of the day, you don’t truly own any part of the property or land. You simply lease it from the freeholder.

A share of freehold is a different story. Yes, you still have a leasehold interest in your individual flat or apartment. But you ALSO jointly own a portion of the freehold alongside your fellow flat/apartment owners. The shared freehold ownership gives joint responsibility for the building’s management and upkeep.

Having a share of freehold for a property gives you a direct say in what happens with that building. Here are some of the main benefits of owning a share of freehold:

Control over property maintenance

When you’re a leaseholder, dealing with building maintenance can feel like an endless game sometimes. You pay service charges but then may end up having to sit tight while the freeholder gets around to scheduling repairs and upkeep. Not an ideal situation for you, or your home.

But with a share of freehold, you and the other co-owners are in control. Rather than leaving maintenance to an external landlord, it’ll be you and your co-owner’s responsibility to organise maintenance and building insurance yourselves.

Savings on lease extension

As a leaseholder, one of the biggest headaches can be extending your lease. And the shorter you have left on your lease, the higher the premium your freeholder may charge in fees. The cost of a lease extension can easily cost thousands of pounds.

But when you own a share of freehold, that whole process can become refreshingly simple and affordable. Co-owners can decide on the premium themselves or choose to not charge any premium for the lease extension at all.

You could also collectively decide to extend all your leases to 999 years and be done with it once and for all.

Flexibility around restrictions

One of the biggest restrictions of being a standard leasehold owner could be the restrictions and red tape outlined in your lease around what you can and can’t do with your home. This  could be around anything from decorating and pet ownership to noise levels and renovating.

Typically, if your lease contains these restrictions, then you’ll need to gain permission from the freeholder or amend your lease.

Owning a share of freehold means leaseholders can have much more freedom to vary their leases themselves. This will need to be agreed between co-owners, and some restrictions may still be off-limits, but there will be much more flexibility.

Whilst share of freehold properties can offer greater control and flexibility, it does come with some downsides and important responsibilities. Here are some of the problems you could encounter as a share of freehold owner:

Arranging maintenance and building’s insurance

With shared ownership comes shared responsibilities for maintaining your property in top shape. This means that leaseholders will need to organise repairs and arrange building insurance. These tasks can take time and you can be held responsible for any issues that arise. As shared owners, tenants will be responsible for collectively covering the costs for these needs and how they will be shared.

Dealing with disputes between freeholders

With freehold ownership comes a responsibility for working together. Yes, you and your fellow owners gain more control through joint decision-making. But that doesn’t mean anyone gets unchecked authority. 

From varying leases to scheduling repairs, every choice requires consensus among the group. And where there are differing perspectives, there’s always potential for disputes and strained relations. 

So, while that share of freehold ownership can be empowering, it also demands commitment to collaborating peacefully. Compromise becomes key when you’re all equal calling the shots.

Communication breakdowns

Communication is everything when you’re co-owners. A lack of clarity or chances to voice concerns can quickly breed misunderstanding and frustrations among the group.

Keeping everyone informed and creating open dialogue is crucial for harmonious freehold living. But when communication breaks down and disagreements occur, it’s important to have resources like mediation and legal advice to get comms back on track.

The key is committing to respectful discussion from the get-go. With healthy communication habits, even the toughest decisions can be resolved amongst friendly co-owners.

Financial tensions

Money talks can get tricky when you’re a co-owner. Rarely is everyone on the same financial board and keeping that communal piggy bank healthy for maintenance means navigating different perspectives. 

Tensions could flare over sinking fund contributions if someone falls behind on payments, or if the apprehended money manager isn’t an open book about balances and expenses. 

It’s a matter of maintaining transparency and understanding. With some mindful communication, even the thorniest financial issues can be resolved.

Selling your share of freehold and wondering whether it’s going to be a hard sell? Properties with that freehold are often more desirable when compared to standard leaseholds. Savvy home hunters recognise and appreciate that added ownership perk.

That said, the sales process does involve some extra complexity. Unlike a typical leasehold sale where the freeholder completes the LPE1 form, for a share of freehold, the remaining co-owners need to jointly provide that information.

You may also need approval from the other share of freeholders when selling. Whoever buys your share of the freehold will receive the added benefits and responsibilities. Other co-owners may want to make sure that whoever is taking your place can be trusted.

Both the leaseholders and the property will need to be eligible to begin the legal process of purchasing a freehold building. The legal process is called Collective Enfranchisement. Here’s an overview of what you and your property need to be eligible:

• Two thirds of the flats are owned by leaseholders who have leases of more than 21 years remaining
• The building contains two or more flats
• The flats are part of a building or a self-contained building of flats

There are certain situations in which tenants do not have the right of Collective Enfranchisement, including:

• Where a leasehold owns three or more flats in a building
• Where more than 25% of the building is commercial
• Where the landlord lives in the building, and it is divided into four or less