Share of freehold

newfoundglory

I am unsure if buying somewhere that is a share of freehold is a good idea.

Having done lots of reading on the issue... am I right to assume that in general the vast majority of properties advertised by estate agents as being "share of freehold"... are in fact leasehold properties with a share of the freehold?

I can fully understand why this might be, for various legal and mortgage reasons of course.

I am however not sure what this means for me exactly.

I am also confused that a leasehold with share of freehold has a leasehold term attached to the lease, since the leaseholder is also the freeholder?

G_M

The lease and freehold are 2 completely separate legal entities.

There's a house divided into 3 flats. The land on which it is built, and the structure, are the freehold. They are permenant features.

Each flat has a lease (say 99 years). At the end of the 99 years, the lease disappears/ends and ownership reverts to the freeholder(s) who may or may not be the then residents (see below).

Each owner owns the lease to their own flat ( and 1/3rd of the freehold in the case of shared ownership).

If work needs doing to the structure (roof, common areas like hallway ) the 3 freeholders split the responsibility/cost.

In some cases, however, the freeholder is a completely different person, or even a company, and the leaseholders do NOT own a share of the freehold. The freeholder may live somewhere totally different.

Richard_Webster

The lease and freehold are 2 completely separate legal entities.

There's a house divided into 3 flats. The land on which it is built, and the structure, are the freehold. They are permenant features.

Each flat has a lease (say 99 years). At the end of the 99 years, the lease disappears/ends and ownership reverts to the freeholder(s) who may or may not be the then residents (see below).

Each owner owns the lease to their own flat ( and 1/3rd of the freehold in the case of shared ownership).

If work needs doing to the structure (roof, common areas like hallway ) the 3 freeholders split the responsibility/cost.

In some cases, however, the freeholder is a completely different person, or even a company, and the leaseholders do NOT own a share of the freehold. The freeholder may live somewhere totally different.

Nice succinct explanation.

To go on, if you are getting a mortgage it will be on the leasehold because that is all you will own on your own - the other co-freeholders won't want your mortgage secured on property that they jointly own! Don't confuse your lender by telling him it is shared freehold - it is a flat and lenders expect flats to be leasehold. Leave it at that.

I say that because if the flat was a pure freehold flat, i.e. there was a separate freehold title for each flat in the building rather than there being one freehold for the whole building, then the flat would be effectively unmortgageable (except in Scarborough for some reason). So as soon as you start mentioning that the flat is shared freehold - using the word freehold in any way in connection with it - then some people in lenders' offices get confused and you can end up being refused a mortgage because they misunderstood!

Generally "shared freehold" flats are considered to be better buys then what people term "leasehold" flats (although as explained they are all leasehold). This is because you don't have to pay admin charges for some landlord or managing agent to manage the building and normally when the leases need extending to make them mortgageable, this can be done by the shared freeholders together for no more than the cost of the legal work involved, rather than 4 or 5 figure sums charged by outside freeholders.

You are reliant on the other co-freeholders being co-operative and reasonable because you need them to extend your lease and to transfer the share in the freehold to your buyer (all have to sign for this - not just the flat owners selling). This issue is not so relevant if a company owns the freehold and in turn is owned by the flat lessees because then a majority can overrule a difficult person.

If the freehold is literally owned by up to 4 people it only takes one to have an argument with the others for him to refuse a lease extension or to sign over a freehold share and it is not cheap or easy to sort this out through the courts.

Also if a flat is repossessed the mortgage lender cannot deal with the freehold title (unless held by a company owned by the lessees) so the defaulting borrower will still have his name on the freehold title, and unless he can be contacted. the freehold then goes into an effective limbo because nobody can transfer shares in it without his signature. This makes all the flats more difficult to sell because you have a kind of absentee landlord situation.

It is therefore vitally important to make sure you can get on with the other co-freeholders. Go and talk to them before you exchange contracts to buy. Do not blindly assume that you have legal rights that you can enforce - in many ways you don't - you will be reliant on their reasonableness. If they are not reasonable then don't buy a flat in that building.