Buying a flat with a share of freehold can offer real advantages over a standard leasehold, but it also comes with its own legal considerations that are worth understanding before you commit.
The Basics: Freehold, Leasehold and Share of Freehold
When you buy a property in England or Wales, you will usually own it in one of two ways: freehold or leasehold. If you own the freehold, you own the building and the land it stands on outright, with no time limit on your ownership. If you own a leasehold, you own the right to occupy the property for a fixed number of years under the terms of a lease granted by the freeholder.
Most flats are sold as leasehold. The freeholder, sometimes called the landlord, owns the building itself and usually collects service charges, and on many older leases a ground rent, from the leaseholders. This arrangement can work perfectly well, but it does mean that someone else ultimately controls decisions about the building.
A share of freehold is a third arrangement that sits somewhere between the two. Each flat owner holds a leasehold interest in their own flat, but the freehold of the entire building is owned collectively by a company or by the flat owners themselves acting together. So what does share of freehold mean in practice? It means that you and your fellow flat owners jointly own the building, giving you a much greater say in how it is run and maintained.
How Share of Freehold Is Usually Structured
In most share of freehold arrangements, the flat owners set up a company, often called a freehold company, to own the freehold. This is different from a residents' management company that only manages a building, although some companies do both. Each flat owner then holds a share in that company alongside their leasehold interest in their own flat. When you buy a flat like this, you purchase both the leasehold and the share in the company at the same time.
Because the flat owners control the freehold company, they make collective decisions about things like building insurance, maintenance contracts, and major repair works. There is no outside landlord setting service charges or making decisions you have no input into. This is one of the main reasons buyers find share of freehold appealing.
Some older arrangements are structured differently, with the freehold held jointly by the flat owners themselves rather than through a company. Only up to four people can be named as legal owners, so buildings with more flats usually use a company. Both structures are common, and both have their own legal considerations, which is why it matters to have the paperwork looked at carefully before exchange of contracts.
How It Differs from a Standard Leasehold
With a conventional leasehold flat, the freeholder sits above you in the ownership structure. You pay ground rent (in older leases) and a service charge, and the freeholder or their managing agent arranges maintenance and insurance. If the lease term runs short, extending it can be costly and time-consuming. You also have limited control over decisions that affect your home.
Share of freehold changes that dynamic considerably. The key practical differences are:
- Control. As a part-owner of the freehold, you have a say in how the building is managed, what contractors are used, and how the service charge budget is spent.
- Lease extension. Because you collectively own the freehold, the flat owners can agree to extend each other's leases relatively straightforwardly, often at low cost compared with the formal statutory route. Your mortgage lender will usually need to agree to the extension.
- No outside landlord. There is no third-party freeholder whose interests may conflict with yours.
- Responsibility. With greater control comes greater responsibility. You and your co-owners are collectively responsible for the building, so everyone needs to engage with decisions and contribute to costs.
It is worth noting that share of freehold is not automatically better than leasehold in every situation. A well-managed leasehold building with a professional managing agent can run very smoothly. The right answer depends on the specific property and the people involved.
What to Check Before You Buy
Share of freehold properties can be excellent purchases, but there are several things worth looking into before you proceed. When you instruct our conveyancing team, we will raise these points on your behalf, but it helps to be aware of them from the outset.
- The lease length. Even with a share of freehold, your flat is still held on a lease. We check that the remaining term is acceptable to your mortgage lender and long enough to avoid problems if you come to sell in the future. Short leases can cause difficulties even where a freehold share exists.
- The freehold company's documents. We review the articles of association, any shareholders' agreement, and the company's accounts where available. These tell us how decisions are made and whether the company has been properly maintained.
- Service charge history and reserve fund. We ask for three years of service charge accounts and check whether a sensible reserve fund has been built up for major works. A building with no reserve fund can mean an unexpected large bill shortly after you move in.
- Building insurance. We check who insures the building under the lease, usually the freehold company, and that the cover is adequate.
- Consent requirements. Some leases require the freehold company's consent for alterations, subletting or other matters. We read the lease carefully so you know what permissions you may need in the future.
- Sellers' solicitors' replies to enquiries. We raise detailed enquiries with the sellers' solicitors and review their replies before we advise you on whether to proceed.
How Our Conveyancing Team Reviews the Paperwork for You
When you instruct Brewer Wallace to act on your purchase, we handle the full legal process from the moment we receive the draft contract pack from the sellers' solicitors. Share of freehold transactions involve more documents than a straightforward freehold purchase, and we take care to work through all of them methodically.
We read the lease in full, checking for any unusual clauses or restrictions that could affect how you use or sell the property. We examine the freehold company's constitutional documents and confirm that the share is being transferred to you correctly alongside the leasehold title. We also carry out the standard searches, raise enquiries, and report to your mortgage lender if you are buying with a mortgage.
Once we have everything we need, we produce a clear written report setting out what you are buying, how the building is managed, what your obligations are as a leaseholder and as a shareholder in the freehold company, and anything we think you should be aware of before you exchange contracts. We want you to feel confident in what you are committing to, with no surprises further down the line.
If anything in the paperwork gives us cause for concern, we will tell you plainly what it means and what your options are. We do not rush you to exchange before you are ready.
If you are thinking of buying a share of freehold flat, or if you have been offered one and you are not sure what to make of the paperwork, we would be glad to help. Please get in touch with our conveyancing team to talk through your situation and get started.
Our local conveyancing teams: conveyancing solicitors in Hull, Bridlington, Hornsea and Beverley.