Circa London explains share of freehold when purchasing a property

Published: 05/03/2024

What is a Share of Freehold When Purchasing a Property? A Comprehensive Guide

Purchasing a share of freehold can be an intriguing yet complex option for many central London property buyers. While it may initially seem confusing, understanding its nuances can help you decide whether it's the right choice for you. Here, we'll break down the concept of a share of freehold, explore its pros and cons, and how it can impact your property investment in areas like Bermondsey, Kings Cross, Canary Wharf, Elephant & Castle, and beyond.

What is Share of Freehold?

A share of freehold is a unique property arrangement in which the freehold of a property is jointly owned by the leaseholders or by a company controlled by them. This is most commonly seen in Central London properties where a group of leaseholders share the freehold title ownership. This means the leaseholders collectively own the land on which their property sits, giving them a stake in the overall building or complex.

With a share of freehold, owners generally have more control over the property and its management. This could include influencing maintenance charges, deciding on building improvements and negotiating lease extensions. For many, this arrangement offers a sense of security and autonomy, which can be appealing when compared to the more traditional leasehold setup.

Advantages of Owning a Share of Freehold


  • Control Over Property Management: One of the main benefits of owning a share of freehold is the increased control it gives you over property management. Unlike leasehold arrangements where a landlord controls the property, with a share of freehold, you and your fellow owners have a say in important decisions such as maintenance, repairs, and lease extensions. This can help keep costs down and ensure that communal areas are well-maintained.
  • Lower Lease Extension Costs: One significant advantage is the ability to extend your lease at a lower cost. Leaseholders typically face steep charges for extending their leases, but with a share of freehold, you can negotiate a lease extension with the other shareholders, potentially saving you thousands of pounds in the long run.
  • More Autonomy: The share of freehold owners in areas like Blackfriars or The Cut & Waterloo enjoy greater autonomy since they are part of the decision-making process. This is particularly appealing for people who wish to have a direct say in managing the property, rather than relying on an external freeholder.
Potential Drawbacks to Owning a Share of Freehold

While a share of freehold offers many advantages, it's not without its challenges.

  • Decision-Making with Other Shareholders: The most significant drawback is that you'll need to work with the other shareholders to make changes. This can lead to potential disagreements, especially if you want to complete major works or modify the building. For example, if you want to renovate your flat you may face delays in getting approval from other shareholders.
  • Administrative Responsibilities: Another potential downside is the administrative burden that comes with owning a share of freehold. You will likely have to participate in running the company that holds the freehold title, which includes handling tax returns, accounting, and ensuring the property's insurance is up to date. This can be time-consuming and, if neglected, may lead to penalties and fines.
  • Possible Complicated Sales Process: If you ever decide to sell your property, obtaining signatures from all shareholders for the freehold transfer can slow down the sale. This process can be cumbersome, particularly if you're in a property located in high-demand areas like Elephant & Castle or Canary Wharf, where properties often move quickly.
Understanding Share of Freehold in Central London

For prospective buyers in Central London, understanding the share of freehold arrangements is crucial when investing as  many properties offer a share of freehold as part of their leasehold structure. However, it's important to note that this arrangement can differ depending on the specific building and the rules set out by the company managing the freehold.

Independent estate agents like Circa London Sales & Lettings can help navigate the complexities of buying properties with a share of freehold. They can also offer guidance on the legal obligations, the management company's role, and how ownership works within a communal structure.

How Share of Freehold Works in Practice

In practice, the share of freehold works when a group of leaseholders collectively purchase the freehold or when the freehold is held by a company that the leaseholders own. Every owner typically holds a share in the company, giving them voting rights and control over the building's management. This may include deciding on key factors such as:

  • Maintenance and repair costs
  • Improvements to the building or communal areas
  • Decisions regarding lease extensions and renewals
  • Setting annual service charges and insurance premiums
However, it is important to note that all decisions regarding the property are made collectively, so you'll need to work harmoniously with other owners to make any changes.

Conclusion

Purchasing a share of freehold can be an attractive option for property buyers seeking greater control over their property and its management. If you are looking to invest in a property in Bermondsey, Kings Cross, Canary Wharf, or Elephant & Castle, a share of freehold can provide a level of autonomy that leasehold properties can't offer.

However, it's essential to consider both the advantages and disadvantages before proceeding. While you may benefit from reduced lease extension costs and more say in the property's upkeep, you should be prepared for the administrative responsibilities and potential challenges of working with other shareholders.

If you are unsure how a share of freehold might work in your situation, contact Circa London Sales & Lettings. Our expert team can guide you through the complexities of share of freehold and help you make the best decision for your needs.
0203 137 7877 info@circalondon.com
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