Leasehold and Freehold - eh?

angelface

I've read another post a bit like this one - we have offered money on a mortgage for a flat with a share of the freehold. However, the estate agent has said that there is also a lease.

He said - and i quote - 'its the best of both worlds'.

I can't see how. Or why? Whats going on. If you have the freehold then surely you don't need a lease?

westernpromise

Where you have one property which is split into flats, it is usually unfeasible to give each flat owner an individual freehold.

I am not sure exactly what the limitations are, but if you have three flats on three storeys, for example, what precisely would you have the freehold of, if you had the freehold of the top floor flat?

Instead, you share the freehold among all the owners. This makes the length of the lease irrelevant, since - with the other freeholders' agreement - you can grant yourself a lease extension any time you feel like it.

My OH co-owns the freehold on her flat but hasn't updated the leasehold from its current 76 years. It is a formality to do so, but it's not free of cost - the change in status has to be advised to your mortgage lender and I think recorded at the Land Registry, both of whom will probably charge.

So if you own a piece of the freehold, you are both lessor and lessee. The other benefit from it is that you control who does the management, which is not the case if you just lease.

AndrewSmith

Hi,

Share of freehold is quite simple but can easily cause confusion.

A block of flats, say 4 units, is owned outright by the freeholder (the person who owns the building, land etc) and he is responsible for the upkeep of the land and building, and insuring it etc (amongst other things).

When you purchase a flat within this block you are buying the leasehold for a set number of years (eg 100) which gives you occupancy rights for that time. You do not own the building or land or any external structures (guttering, roof etc).

When you purchase a share of freehold, you still buy the leasehold of your individual flat, but also buy a stake in the entire building as well. In the above example you would be 25% owner of the building and would share the insurance and maintenance responsibilities with the other 'owners'.

It means that you have a say it what happens regarding upkeep, maintenance, lease issues etc etc.