What Does Share of Freehold Mean?
Estimated reading time 5 minutes
If you’ve bought or rented a property you will likely be familiar with the terms leasehold and freehold. However, did you know that properties can have both a leasehold and a freehold? In short, purchasing a share of the freehold would give you shared ownership of the freehold title of a building.
Typically applicable to flats or maisonettes that make up a larger property, share of freehold can happen in two different ways.
As the leasehold owner of the property, the freehold may be split jointly between all tenants within the property as a whole. This can be done up to four owners and all your names would be on the freehold.
Another avenue is when a company owns a block of properties. As a property owner you may be offered a share of the company who owns the freehold – also sometimes known as a membership. Alternatively, your share of the freehold will mean your name is on the title deeds, along with all other property owners.
Many people find it confusing that you can own a leasehold property and have a share of the freehold. Why not just scrap the leasehold altogether? We understand it may seem complex.
The main reason as to why leaseholds with freehold shares work in this way relates to transference of obligations. When you buy a property with a leasehold both the seller and the buyer have obligations that are covered in the lease. Having the lease in place allows these obligations to be passed between the seller and the buyer easily.
As we have touched upon, leasehold properties are often part of a block, where multiple homeowners live in the same building in their individual homes. Without having a lease in place, homeowners could dismiss communal responsibilities and property upkeep as they are detailed in the lease agreement. This offers a level of protection for both the freeholder and the leaseholder.
Having a share of the freehold when owning a leasehold property gives homeowners:
- Greater control over maintenance obligations
- No issues with dishonest landlords
- All homeowners are invested in the building
- Cheaper service charger
- Cheaper lease extension
It may sound like owning a share of a freehold as a homeowner is a good thing and it definitely has it’s upsides. Like anything, however, it can have disadvantages.
There is a chance that maintenance costs could be higher some years than others. This is simply because some larger tasks will need to happen throughout the years. However, because the service charge will be less, this can offset itself if you own the property for a longer period of time.
If you want to sell sometimes the logistics can be tricky. To sell a leasehold flat with a share of the freehold all other owners will need to sign your transfer of the freehold. You will need to get identification on each freehold share owner to provide to the Land Registry and this can be time consuming if the other homeowners aren’t playing ball.
Other requirements may include:
- Homeowner to undertake admin tasks
- Accounting duties
- Arranging property insurance
It is worth remembering that these downsides don’t impact all leasehold homeowners with a share of the freehold.
You can get a mortgage on a share of freehold property. However, some lenders can be hesitant to mortgage this type of home due to the costs that can be associated further down the line.
However, there are countless lenders who will provide a mortgage on a share of freehold property. If you’re considering buying one keep the following in mind:
- It’s easier to get a mortgage on a property with a long lease left
- Lenders will be attracted to share of freehold properties with a management company in place
- You may be required to pay a higher deposit or higher interest rate to offset the risk in the eyes of the lender
Realistically it should not be more or less difficult to buy or sell a property with a share of freehold. The property market is home to a mix of freehold and leasehold properties and there is certainly a place for share of freehold properties too, there will just be slightly different processes or admin requirements in place.
If you want to sell your share of freehold property but are struggling, why not contact a cash house buyer such as Gaffsy. We buy any house for cash using our own funds, offering clients a guaranteed route to sale by purchasing the property ourselves. We also offer a sell flat fast service. This means you can avoid any issues relating to selling a share of freehold property. So if you want a fast house sale or are struggling with a short lease property don’t hesitate to get a free cash offer or contact us today.