Published: 12/08/2022A Share of Freehold Explained: What You Need to Know
What is a Share of Freehold?
A share of freehold is essentially a way for individual flat owners to have a stake in the ownership of the freehold. There are two ways of setting up a share of freehold:
- The freehold is split jointly between the owners within the property, and the freehold is held in their names. This setup is usually only for four owners.
- If a company owns the freehold, each leaseholder may hold a share of the company.
Why does a Share of Freehold Exist?
A share of freehold exists to address the limitations of traditional leasehold arrangements. If you own a flat with no lease, removing yourself from communal responsibilities and the upkeep of the property can be difficult. However, having a lease defines the obligations between the leaseholder and the freeholder, such as payment of property management and service charges, ensuring all communal responsibilities are dealt with.
The Benefits of Having a Share of Freehold
- Greater control: Share of freehold allows the owner to have greater control over maintenance charges and removes the possibility of an absentee landlord overcharging or underdelivering.
- A higher standard of property maintenance: Holding a share of freehold ensures the property owners will be more invested in the building, leading to a higher standard of property maintenance.
- Extendable lease: The lease can be extended at a lower cost, potentially saving thousands of pounds. Short leases become less valuable as time goes by.
- Time-consuming process: Getting owners to sign the freehold transfer if they want to sell their flat can prove time-consuming, as people can be challenging to pin down.
- Administrative responsibilities: Owners must tackle the administration of the company that holds the freehold, such as tax returns and accounting, or face a hefty fine and possible cancellation of the holding company.
- Insurance premium: Property insurance must be in place, and the premium is collected from each owner annually.
Circa London Estate Agents specialises in luxury London property for sale.