What does share of freehold mean?
The Leasehold and Freehold Reform Act 2024 was passed on the 24th May 2024, but is not yet in effect and the date for this is not yet clear. We will update our content as and when the finalised legislation is published.
Some of the expected changes include:
- 990 year standard lease extension for houses and flats
- Standardised format for service charge bills, for greater transparency
- Leaseholders will no longer have to pay their freeholder’s costs when making a claim
- Freeholders who manage their building directly must belong to a redress scheme, so leaseholders can challenge them if needed (already applies to managing agents)
- Ban on sale of leasehold houses, except in specific circumstances and schemes
- Fair and transparent buildings insurance handling fees
- Removal of two year requirement before statutory extension
While the existing act abolishes ground rent on lease extension and new leases, the new act does not cap ground rent on pre-existing leases.
- You have no third party external freeholders - you are the freeholder along with your fellow freeholder/s;
- You either carry out repairs to communal areas yourself along with the other freeholder/s or you at least have a say in who carries out the work and can better ensure using reasonably-priced contractors;
- You can agree to develop your property more easily, or vary condition ins your lease as you can agree them with your fellow freeholders before you buy the property (many freeholders prefer to not vary anything and may charge if they so so); and,
- If you want to extend your lease you can negotiate directly with the other freeholder/s: the process should, as a rule, be much less expensive than if you were purely a leaseholder and you may even be able to do so for free if this is agreed in principle with the other freeholder/s. Read more - How to extend a lease where you own a share of the freehold
Tips for Selling or Buying share of freehold
Selling a Share of Freehold | Buying a Share of Freehold |
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What are share of freehold problems?
- The share of freeholders may not agree to how the freehold should be managed such as not allowing leases to be extended or who is going to maintain the property.
- Share of freeholders who fail to perform their duties are in breach of the leaseholders and could effect the resale or financing of the leaseholds.
- It is extra work and whilst some agree to do this work, others may not do their fair share.
- When a share of freeholder sells, you have no guarantee that the new owner will perform the same duties as freely as the departing freeholder.
Is a share of freehold a freehold?
Which properties are most likely to be share of freeholds?
What are the Pros and Cons of buying a share of freehold property?
Pros
- You are your own master, along with the other freeholder/s
- You can negotiate a longer lease directly with the other freeholder/s or with the managing company which you own a share of
- You don't have to pay any ground rent
- You can more easily negotiate matters like developing the property or varying other terms of your lease
Cons
- You and other freeholders have to manage the property yourself.
- It is more expensive than being a leaseholder, particularly in the short term.
- If you haven't set up a management company to run the freehold, when you come to sell, mortgage lenders may be unwilling to lend to potential buyers making selling more difficult.
Freehold Company or held as Guarantee
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Caragh is an excellent writer in her own right as well as an accomplished copy editor for both fiction and non-fiction books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey and mortgage related articles.