Understanding the true implications of purchasing a freehold flat ownership share.

In the world of property ownership, a unique arrangement known as a share of the freehold offers homeowners a different approach compared to the more common leasehold model. Here's what you need to know about this alternative ownership structure.

Owning a share of the freehold means holding a portion of the building's freehold along with the leasehold for the individual flat. This arrangement gives joint responsibility for maintaining the building to the freeholders and provides leaseholders with more control over their properties than standard leaseholders do.

One of the key benefits of a share of the freehold is the ability to extend the lease more easily and at a lower cost, as well as the fact that ground rent is no longer a concern. However, it's important to note that there is usually an annual service charge to pay, which can vary significantly depending on the block and its amenities. Service charges can rise significantly, so it's crucial to check the terms of the lease carefully with a solicitor.

Disagreements between flat owners with a share of the freehold are not uncommon, particularly when it comes to agreeing who is paying for what and how much. The increased control of a share of the freehold comes with potential disputes with fellow freeholders, especially regarding management decisions and finances.

The conveyancing process for a flat with a share of the freehold takes slightly longer and costs more due to the freehold ownership transfer. Lenders are usually comfortable with share of freehold properties, as lending is still secured against the leasehold title.

Before buying a flat with a share of the freehold, it's important to get a copy of the lease and ensure you understand it. Stephen Perkins, managing director of Yellow Brick Mortgages, suggests seeking professional mortgage advice to explore options before settling for a flat. He suggests alternatives like a joint borrower, sole proprietor mortgage.

Properties with short leases can be harder to sell or mortgage, but having a share of the freehold is reassuring for the future. The Leasehold and Freehold Reform Act 2024 is now law, but is far from being fully implemented.

In a block of flats, the freehold of the building as a whole is owned collectively by the people who own the individual flats. This means that homeowners with a share of the freehold do not usually have to pay ground rent, but service charges may still apply.

The arrangement of a share of the freehold is a joint venture and demands careful consideration, as it ties your finances and property management to a group of people. To avoid conflicts, it is essential to carefully review and agree on the declaration of division, community bylaws, cost-sharing arrangements, and maintenance responsibilities before buying a condominium unit.

Overall, owning a share of the freehold offers advantages such as greater control over the property's management and the potential for asset building, but also entails responsibilities like maintenance and repair costs. It's a unique ownership structure that provides homeowners with a different level of control and investment potential compared to the more common leasehold model.