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Unlocking the Mystery: What does a Share of Freehold mean?

When it comes to property ownership, the term “share of freehold” is often mentioned, evoking curiosity and confusion among prospective buyers and homeowners alike.

Corinne Flannery, Chartered Legal Executive in our Residential Conveyancing team, sheds light on what exactly a share of freehold is and what it entails.

Understanding the basics 

To grasp the concept of a share of freehold, let’s break it down into its fundamental components. In traditional property ownership, there are two distinct entities: freehold and leasehold.

Freehold: When you own the freehold of a property, you have outright ownership of both the building and the land it sits on, forever.

Leasehold: Conversely, leasehold ownership involves holding the property for a fixed number of years, typically long-term leases ranging from 99 to 999 years. While you have the right to occupy the property during the lease term, at the end of the term the lease will end and ownership will go back to the landlord/freeholder.

Enter the share of freehold

A lease is always necessary when you own a flat because it sets out what parts of the building you are buying and how management arrangements work.  A share of freehold arises when multiple leaseholders collectively acquire the freehold of the building.

In essence, each leaseholder holds a share in the freehold company, granting them joint ownership and control over the building and land.

Occasionally you may have a share in the freehold by being named personally on the freehold title together with other individuals although this tends to apply for buildings with few (often two) flats.

It can make selling and buying a little more completed as the other ‘co-freeholders’ need to be actively engaged in any sale of the property in the future.

Key characteristics of a share of freehold

Now that we’ve established the basics, let’s delve deeper into the key characteristics of a share of freehold.

Ownership Control: As a shareholder in the freehold, you have a say in the management and maintenance of the property. This includes decisions regarding repairs, renovations and communal areas.

Extended Leasehold: Acquiring a share of freehold often involves extending the lease terms of individual properties within the building. This provides greater security and flexibility for leaseholders.

Shared Responsibilities: While share of freehold offers autonomy and control, it also entails shared responsibilities among leaseholders. This includes arranging and payment/collection of maintenance costs, arranging buildings insurance and payment/collection of the premiums, arranging fire risk assessments and asbestos surveys for the communal parts and administration of the freehold company, such as filing necessary documents at Companies House within the required timeframes.

Whether this is positive or negative depends on how proactive and cooperative the other leaseholders are.

Increased Property Value: Properties with a share of freehold status are often perceived as more desirable in the property market. The combination of freehold ownership and extended lease terms can enhance the property’s value and appeal to potential buyers.

Navigating the process 

If you’re considering purchasing a property with a share of freehold or contemplating acquiring the freehold of your existing property, here are some essential steps to navigate the process:

Legal Advice: Seek guidance from a qualified conveyancer or solicitor specialising in property law. They can review the terms of the share of freehold arrangement and ensure that your interests are protected.

Collective Enfranchisement: If you’re a leaseholder looking to acquire the freehold of your building, explore the option of collective enfranchisement. This involves coordinating with fellow leaseholders to collectively purchase the freehold from the current freeholder.

Understanding Obligations: Familiarise yourself with the rights and obligations associated with share of freehold ownership. This includes participating in meetings of the freehold company, contributing to maintenance costs, adhering to the terms of the lease, and complying with the landlord’s obligations.

Conclusion 

Understanding the intricacies of a share of freehold is paramount for both prospective buyers and current homeowners navigating property ownership.

A share of freehold not only grants ownership control and extended leasehold security, but also entails shared responsibilities and potential value appreciation in the property market.

By grasping the fundamental components and key characteristics outlined in this article, individuals can make informed decisions regarding their investments and rights. However, it’s essential to approach the process with diligence and seek legal advice to safeguard one’s interests.

How can Morr & Co help?

The Residential Conveyancing team at Morr & Co are committed to helping buyers and sellers at every stage of the purchasing process and would be delighted to support you.

If you would like more information about freehold or help with your property purchase, please contact Corinne Flannery in our Guildford Residential Conveyancing team on 01483 970140 or by emailing [email protected].

Disclaimer

Although correct at the time of publication, the contents of this newsletter/blog are intended for general information purposes only and shall not be deemed to be, or constitute, legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. Please contact us for the latest legal position.


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