A: Buying a share of freehold means that you will acquire a shared ownership of the freehold title relating to the building, as well as a leasehold interest in the individual flat. Usually the freehold title is registered in the name of a company in which the flat owners will be shareholders.
What does it mean to buy a share of freehold?
This means that when you buy a flat with a share of freehold, you will either be given that share by way of having your name on the deeds of the property, or you’ll be given a share in the company that is controlling the freehold.
Who is the owner of the freehold of a flat?
There are two basic set ups for the ownership of the freehold, the first is that the freehold is owned jointly by a number (up to four) of the flat owners in their personal names and the second is where a company is the owner of the freehold and each of the tenants hold a share or membership in that company.
What are the advantages of share of freehold flat?
• Short leases can devalue a property massivly. Owning a share of freehold flat will allow you and your co-freeholders to grant 999 years leases. • Unlike in leasehold properties, a share of freehold flat come with no ground rent.
Can a freehold flat be sold as a communal property?
It can be done but the mechanisms are more complex than holding a leasehold title where these obligations run naturally with the land – that is to say they pass from owner to owner without any special steps being take on sale. Essentially therefore the communal obligations would simply fall apart if everyone held a freehold flat.
Is it good to have share of freehold?
Having a share of freehold gives you greater control over things such as maintenance obligations which removes the possibility of being taken for a ride by an unscrupulous landlord. Holding a share of freehold also means that everyone in your property will be invested in the block to a certain degree.
What does it mean to have share of freehold?
Whilst you will also have a share in the freehold, what you actually own is a share in the company that owns the freehold – this means that you own it together with all the other leasehold owners (usually). When you come to sell, your buyer will be buying your leasehold title from you and your share in the freehold.
Is share of freehold the same as leasehold?
A 'share of freehold' is sold with the leasehold flat – the leasehold interest is retained and is still the most valuable part but you also aquire a separate shared title or ownership in the freehold.
What are the disadvantages of buying a freehold flat?
The disadvantages of a freehold Freeholds are often more expensive, as you own the land as well as the property. They also usually refer to houses rather than flats, so trying to find a flat available for freehold purchase can be difficult.
Can you get a mortgage on a share of freehold flat?
It is possible to get a mortgage on a share of freehold property or flat. However, the unexpected costs which can come with this type of property can act as a red flag for some lenders. This is not the case with all mortgage lenders, some of whom are more willing to take the risk.
Does share of freehold increase value?
How much does freehold add to house price? According to surveyors, owning a freehold adds 1% onto the value of a flat when compared against a similar property. But the increase in property value isn't always necessarily a persuasive factor.
Can I sell my share of freehold?
As long as the leaseholders qualify for collective enfranchisement (taking on share of freehold), the freeholder cannot refuse to sell the freehold. It is illegal to refuse to sell.
Are freehold flats hard to sell?
There's nothing wrong with a freehold flat per se. The problems are down to mortgage lenders. Most of them don't see a freehold flat as good security, a problem to mortgage as well as difficult to sell. In fact, very few lenders will even consider loans against them.
Is a freehold flat a good investment?
Freehold purchases are going to be a better deal in terms of simplicity and overall control than going ahead with a leasehold one. In most cases it is clear that purchasing a freehold is the best option as although there is a higher upfront cost, the property becomes solely owned by the property investor.
Why do lenders not like freehold flats?
Freehold flat mortgages are almost impossible to come by, with lenders often not seeing this kind of property as good security. There are a few reasons for this: There's no legal obligation for any flat owners to maintain the structure of the building.
Who is responsible for the roof in a freehold flat?
If you live in a flat, the freeholder is usually responsible for repairs to: the building's structure, including the roof and cladding.
Are flats ever freehold?
Freehold is typically for houses and leasehold is usually for flats. Freehold means that you own the land and the building that sits on it. Leasehold means that you own a lease, which is a contract that gives you the right to live in the property for a set number of years (for example, 99, 125 or 999 years).
Is share of freehold the same as shared ownership?
A: Buying a share of freehold means that you will acquire a shared ownership of the freehold title relating to the building, as well as a leasehold interest in the individual flat. Usually the freehold title is registered in the name of a company in which the flat owners will be shareholders.
Why is freehold better than leasehold?
Advantages to buying a freehold property include: Full ownership: You'll have complete ownership of the property and land (so long as you keep up with your mortgage repayments, and/or pay off your mortgage). No charges: You won't have to pay ground rent, service charges, admin fees to the landlord.
What are the benefits of a freehold property?
Benefits of owning the freehold to your flat: Free lease extensions: you can usually extend the lease to 999 years at no extra cost (excluding legal fees) You control service charges: you can choose value for money, quality providers. No ground rent: you normally don't pay ground rent.
Are freehold flats hard to sell?
There's nothing wrong with a freehold flat per se. The problems are down to mortgage lenders. Most of them don't see a freehold flat as good security, a problem to mortgage as well as difficult to sell. In fact, very few lenders will even consider loans against them.
What is share of freehold?
Put simply, a freehold is the common ownership of property or land, and all immovable structures attached to such land. But a share of freehold is...
What is the difference between leasehold and freehold?
If you own a home freehold, you own the building and the land that it stands on until the day that you sell it to someone else. With leasehold, you...
Why does a share of freehold exist?
Without having a lease in place, individual flat owners could remove themselves from their communal responsibilities and the upkeep of the property...
Are there service charges involved?
In recent years the option to become a share of freehold owner has become easier. This allows you to own your flat outright, although it works diff...
What are the pros of having a share of freehold?
Having a share of freehold gives you greater control over things like maintenance obligations, which removes the possibility of being taken for a r...
What are the cons of having a share of freehold?
Ad hoc maintenance can mean that some years will see larger costs than others, should major work be required. But it is worth bearing in mind that...
What is share of freehold?
Put simply, a freehold is the common ownership of property or land, and all immovable structures attached to such land .
What is a freehold property?
Put simply, a freehold is the common ownership of property or land, and all immovable structures attached to such land. But a share of freehold is something different and can be set up in a few different ways. The first is where the freehold is split jointly between a number of flat owners within the property and the freehold is held in their ...
What are the cons of having a share of freehold?
But it is worth bearing in mind that the service charge will generally be lower for self-owned blocks, especially if you live in the property long-term.
How many flat owners can split a freehold?
This can be done with up to four flat owners.
What would happen if a flat owner didn't have a lease?
Without having a lease in place, individual flat owners could remove themselves from their communal responsibilities and the upkeep of the property would be placed in jeopardy.
What is a leasehold home?
With leasehold, you own the property in that you have the right to occupy a home for a fixed period of time, but not the building itself. It is mostly flats that are leasehold, but houses can sometimes be leasehold, too.
What does it mean to have a lease in place?
Having a lease in place also means that these obligations are passed seamlessly between the seller and the buyer, such as property maintenance and service charge payments. This ensures that all communal responsibilities are covered during the sale without any additional steps.
What is a share of freehold?
What is a ‘share of freehold’? There are two basic set ups for the ownership of the freehold, the first is that the freehold is owned jointly by a number (up to four) of the flat owners in their personal names and the second is where a company is the owner of the freehold and each of the tenants hold a share or membership in that company.
How many people own a freehold?
There are two basic set ups for the ownership of the freehold, the first is that the freehold is owned jointly by a number (up to four) of the flat owners in their personal names and the second is where a company is the owner of the freehold and each of the tenants hold a share or membership in that company. Therefore when you obtain a share in the freehold your name will either be noted on the title deeds or you will be issued a share in the company that owns the freehold. In either case you will then own a share in the freehold.
How long is a lease extension for a share of freehold?
This is why lease extensions to 999 years are always recommended for share of freehold (as the free-hold title can easily become detached from the flat ownership).
Can you transfer a freehold when you sell a flat?
If the freehold is owned jointly in the personal names of the tenants it can also be difficult to get the other owners to sign the transfer of the freehold when the flat is sold. The Land Registry also require identification from each owner. This can be frustrating to arrange this when the flat is being sold and one of the co-owners is away!
Is a share of freehold a positive?
As we said agents often push the “share of freehold” as a positive and generally it is . A lease alone is a wasting asset – it becomes less valuable as time goes on as it gets shorter. Eventually you will need to extend the lease and normally if you have a share of freehold you will not be required to pay for this (although there are risks here and it is important to be advise on the purchase to ensure that there are no problems or barriers to this happening). It is therefore cheap and easy to achieve(see our article on extending your lease with a share of freehold). This can be a significant saving for example to extend a lease of around 70 years you would pay £15,000 and upwards to an independentlandlord (based on a flat worth around £250,000).
Is a freehold flat a good security?
The confusion sometimes comes from the fact that ‘freehold flats’ are generally not considered good security for lenders and, save in specific parts of the country, are unusual. A ‘share of freehold’ is sold with the leasehold flat – the leasehold interest is retained and is still the most valuable part but you also aquire a separate shared title ...
Can you buy a flat with a share of freehold?
Buying a flat with a share of freehold. Conveyancing clients often get confused when they are interested in buying a flat which has a ‘share of freehold’. The ‘share of freehold’ aspect is usually marketed heavily by the estate agents especially in London. The confusion sometimes comes from the fact that ‘freehold flats’ are generally not ...
What is a share of freehold?
When you as an owner have a percentage of 100% ownership, this is called a full share. In the case that there are multiple owners, each person will own a separate portion of the property’s title. This means that if somebody else owns 30% also, then the two owners will be co-owners of the land. Each co-owner holds a percentage of the freehold and inherits all the rights that come with owning the land.
How does share freehold work?
Keeping records on dividing property can be an arduous task, so there is usually one title for each property. This means that you and your neighbour might each own 50% of the land, but you will both hold your shares of that one title . This means that there is only one set of records for who has what rights to the land, and this makes administration much easier.
Can a shared of freehold property be freehold?
Because Share of freehold is a policy meant to assist individuals who can’t afford the whole mortgage, you would not be able to buy a shared of freehold home outright.
Does share of freehold add value?
The value of a freehold home is determined by the market and can vary depending on many factors, such as location and price. To purchase a share in the freehold does tend to increase the worth of the property, but it also adds to the purchase price.
What does it mean to have a share of a freehold?
Having a share of the freehold means there will need to be a high level of organisation kept to keep the running of the building.
What is the benefit of having a share of freehold?
Another large benefit of having a share of freehold is the ability for all residents to grant themselves long leases of 999 years. The logic is simple – because every resident owns ‘a share’ of the land, they are entitled to make decisions on the length of the lease.
What are the pros and cons of buying a leasehold?
Buying a leasehold in a flat does have some benefits, but there are also some additional financial costs in doing so ( we wrote a full post on the pros and cons of leaseholds here ). One disadvantage with leaseholds is the mandatory costs that must be paid each year – including service charge. As much as flat owners like to complain about service charge – it is a very important cost. Without it, there are no funds available for maintaining key parts of a building. For more details on this head over to our post on a full guide to service charges . Often leaseholders are suspicious about the level of service charges for a building. It is a common practice for the freeholder to employ the services of a management company to run the maintenance and operations of a building. However it can be difficult for leaseholders to dispute the charges that are billed to them (sometimes it can involve going to a tribunal for a decision).
Why buy a share of a building?
Buying a share of freehold allows all residents of a building to make a collective decision on key spending decisions. The new freeholders can avoid paying expensive management fees to private companies running the building (it does happen). It is a process that gives a large amount of control back to leaseholders, but equally imposes a large responsibility on them too.
Why are freeholders more understanding?
Because the other freeholders are aware that you could cause future problems for them when getting consent to do some works, they are likely to be more understanding than the original landlord would be, and potentially more flexible.
What happens if a freeholder is owned by individuals?
If the freehold owned by individuals there will need to be unanimous consent from all parties to any motion/proposal before it can be taken forward. This has the risk of a “swing voter” deciding to hold out or vote against. If this happens, there is little that can be done until the conflicting freeholder changes their mind.
What is the third option in freehold?
There is also a third option – buying a share of the freehold.
What does "share of freehold" mean?
What this means is that in a ‘Share of Freehold’ flat, you will acquire shared ownership of the building’s freehold title, but (and that’s a big ‘but’) will still have to maintain the leasehold element of your individual flat.
Why are freehold properties so attractive?
The main reason why freehold properties are attractive to buyers. Whereas leasehold properties are in essence the reverse. With a leasehold property, while you own the right to occupy your property, you do not own it, nor the land on which it is built.
How many flats can you split?
With this option, each flat owner would own a share of the freehold in their personal name. This method can be used with a maximum of four flats. 2 - The alternative method is to own the freehold through a company, in which each owner is a shareholder.
How long does a lease on a flat affect the value of the property?
Buy a share of freehold flat with a lengthy lease. Leases affect the value of a property immensely. Anything under 85 years starts to affect a property’s value. Leases of 70 years or less can make a property unmortgageable, or at the very least up your interest rate. As mentioned above, owners of freehold flats have the luxury ...
How long does it take to close a freehold flat?
Equally, for those struggling to sell a share of freehold flat on the open market, we can swoop in and close a sale in as little as 7 days.
Why is renting a flat so hard?
With any breed of freehold flat, renting is difficult because you’re not the sole owner of the building. To do so, what’s called a ‘consent to let’ needs to be written into the lease that’s held between each of the flats. Some share of freehold flats own a larger perecentage of the building's freehold - this could because they're larger, on the ground floor etc. - which can make this slightly easier or harder.
What is a red flag when you get a mortgage?
In granting a mortgage, a lender is investing their capital into your property, so they want it to be safe. And sadly with a share of freehold flat, the large, often spontaneous maintenance costs, come as an immediate red flag, as costly unexpected issues (like the above) could see you fall behind on your repayments.
What is a share of freehold?
A share of freehold provides the holder with ownership of a percentage of the freehold interest in a building. Typically, a share of freehold is held by a leaseholder of one of the flats in this building, while the other shares are held by all or a few of the other leaseholders in the same building. The shares can either be held in the leaseholder’s personal names, or the leaseholders can own a share in a company (set up by the leaseholders) that owns the entire freehold.
Why are flats with freehold considered insecure?
Although flats with a share of freehold are promoted as advantageous for prospective purchasers by estate agents , some mortgage lenders view these types of properties as insecure investments. This is because the positive obligations i.e. the responsibilities to repair, maintain, and insure the building can be easily ignored by the shareholders or they may have difficulty enforcing such obligations. Therefore, the building could fall into a state of disrepair or could be left without suitable financial cover to rectify any damage caused by theft, fire, storms, etc. Consequently, some lenders will be unwilling to agree to mortgages on flats with a share of freehold.
How many flats can a leaseholder own?
Leaseholders must not own more than two flats in the building. If these qualification criteria are satisfied and leaseholders wish to proceed with Collective Enfranchisement, they must do so by issuing a Section 13 Notice on the freeholder. 2. Buying a new property that comes with a share of freehold. When the owner of a leasehold property ...
What is ground rent?
Consequently, the freeholder is entitled to charge the leaseholder rent for living in his building, known as ‘ground rent’. Furthermore, leaseholders will be responsible for paying for repairs, maintenance, and insurance for the building as per the terms of their lease.
How long can a freeholder lease extend?
Furthermore, while a freeholder is likely to grant a lease extension of anywhere between 99 and 125 years, the owner of a share of freehold could extend for up to 999 years. Similarly, a freeholder is likely to require you to continue paying ground rent as per the terms of your lease but as the owner of a share of freehold, ...
How many leaseholders must agree to collectively enfranchise?
At least 50% of qualifying leaseholders must agree to Collectively Enfranchise
Why is it difficult to get the other shareholders to sign the share of a lease?
This is usually because they want to protect their asset and retain full control without bringing in a new shareholder.