High Holborn

Estate Agents often use the slightly confusing term “share of freehold” when marketing a flat, so what exactly does it mean and what will you end up with when you complete your purchase?

What you are in fact buying can be split into two parts – firstly, the lease of the flat itself as you would expect and secondly, a share in the freehold of the whole building.

The freehold element is generally owned in one of two ways - the first is where up to four individuals are named on the freehold title (generally for small blocks or converted houses) and the second is where the freehold is owned in the name of a company and the shares are owned by the leaseholders in the building. Those shares are then sold to the buyer together with the lease.

The unexpired term of the lease is still very important, despite the fact that the lease is being purchased with a share of freehold. A mortgage lender will normally have a minimum requirement for the number of years left on a lease and the cost of obtaining a lease extension increases significantly once the term falls below 80 years. Despite common belief, owning a share of freehold does not automatically entitle the leaseholder to a lease extension for no premium. However, owning a share of freehold generally makes the process much simpler.

Having a share of freehold comes with a say in how the building is managed. It should also mean that everyone has an investment in the block and that the property is kept to a higher standard than a block owned by a third party landlord who wants to make a profit from it.

However, owning a share in the freehold can be an administrative burden. In smaller blocks where the freehold is owned in individual names, all of the other freeholders need to be available to meet and take collective decisions before anything can happen. If the freehold is owned in the name of the company, then accounts and an Annual Return need to be prepared and filed with Companies House every year.

However your freehold is owned, service charge accounts will need to be prepared, contributions need to be collected and insurance put on cover. The freeholders will also be responsible for complying with current regulations relating to the building, for example complying with fire regulations and arranging for a fire risk assessment to be undertaken. These tasks can be handed over to a firm of managing agents, but they will charge a fee for the service they provide.

In general terms, the pros usually far outweigh the cons and owning a share of freehold can put you in control as long as you participate fully.

We are experts in buying and selling properties, including share of freehold as well as lease extension work.


Claire Joseph

Estate Agents often use the slightly confusing term “share of freehold” when marketing a flat, so what exactly does it mean and what will you end up with when you complete your purchase?