Downsides to freehold?

t1redmonkey

I'm just in the browsing stage at the moment, but I have in the past heard people say freehold flats are much better than leasehold because you have less chance of being ripped off by a larger management company, and the service charges are normally fairer as a result.

But it got me thinking; are there actually some -bad- points of freehold vs leasehold? Or are there any particular things that people can suggest keeping an eye out for when buying a freehold flat? I don't know why, but I had a thought that if there was say 5 tenants in the block of flats, could they cheat you by making you pay more than the other 4 of them, or does everyone have to pay equally?

I haven't lived in any type of flat before so I apologise if this is a stupid question!

catgirl2

t1redmonkey wrote: »

But it got me thinking; are there actually some -bad- points of freehold vs leasehold? Or are there any particular things that people can suggest keeping an eye out for when buying a freehold flat? I don't know why, but I had a thought that if there was say 5 tenants in the block of flats, could they cheat you by making you pay more than the other 4 of them, or does everyone have to pay equally?

I haven't lived in any type of flat before so I apologise if this is a stupid question!

Not stupid at all.

The most obvious downside is if they don't pay up or don't agree to do work that needs to get done. It must be awkward to be both a good friendly neighbour and at the same time the person who says pay up or else.

It's totally down to who your neighbours are - what they are like to get along with, what their financial circumstances are, whether they have a sensible attitude to maintenance of the building. My take on it it is that the smaller the building the easier it's likely to be. On the other hand, if you have just one neighbour and they turn out to be irrresponsible, that's worse than having 2 or 3 people at least one of whom is on your side!

So I'd say it's mostly upside, but move heaven and earth to meet your neighbours and suss them out as soon as you can.

G_M

Is this Scotland? I'm guessing it is.

In England a freehold flat would not be mortgageable, so trying to sell it will be a nightmare.....

catgirl2

G_M wrote: »

Is this Scotland? I'm guessing it is.

In England a freehold flat would not be mortgageable, so trying to sell it will be a nightmare.....

I don't understand this so I expect you have an expert's knowledge of the terminology which differs from the everyday usage by estate agents and buyers and sellers?

In England flats get advertised as "share of freehold" which seems to mean the occupiers have shares in a company that owns the freehold. Together they own 100% of the company. So they get to decide together what to do with the maintenance, rather than some company that they don't own. Those flats are certainly mortgageable.

G_M

catgirl2 wrote: »

I don't understand this so I expect you have an expert's knowledge of the terminology which differs from the everyday usage by estate agents and buyers and sellers?

In England flats get advertised as "share of freehold" which seems to mean the occupiers have shares in a company that owns the freehold. Together they own 100% of the company. So they get to decide together what to do with the maintenance, rather than some company that they don't own. Those flats are certainly mortgageable.

You're right. There is a HUGE difference between a leasehold flat that is sold along with, separately, a share of the freehold, and a freehold flat.

Kynthia

catgirl2 wrote: »

I don't understand this so I expect you have an expert's knowledge of the terminology which differs from the everyday usage by estate agents and buyers and sellers?

In England flats get advertised as "share of freehold" which seems to mean the occupiers have shares in a company that owns the freehold. Together they own 100% of the company. So they get to decide together what to do with the maintenance, rather than some company that they don't own. Those flats are certainly mortgageable.

As far as I understand it from others more knowledgeable on this site, we don't really have freehold flats in England and even 'share of freehold' is slightly different from the truth. What you have are leasehold flats with a freeholder. However in some cases either up to four flats owners own the freehold, or the leaseholders have banded together and all formed a company that owns the freehold and are therefore joint directors in this company. As a result it is still a leasehold flat as there is still a lease and both the freeholder and leaseholder must abide by the lease, but each leaseholder is also part of the company that owns the freehold. Many people misunderstand this and I certainly don't know much about it, but there are others that do. Perhaps they could tell you more about the disadvantages of being a freeholder, or the link below might help.
http://www.ker.co.uk/residential-news/188-what-is-a-share-of-freehold.html

Richard_Webster

Kynthia's last post was very nearly right, except that

As far as I understand it from others more knowledgeable on this site, we don't really have freehold flats in England

isn't strictly true. We do have pure freehold flats where each flat has its own separate title. Thankfully they are rare, but as has been said, virtually unmortgageable.

Propertyman may be along as he has strong views on this matter and the confusion that is caused by use of some terminology.

If you can find it then my practice's website has a lot of explanations about the point.

ValHaller

Kynthia wrote: »

As far as I understand it from others more knowledgeable on this site, we don't really have freehold flats in England and even 'share of freehold' is slightly different from the truth. What you have are leasehold flats with a freeholder. However in some cases either up to four flats owners own the freehold, or the leaseholders have banded together and all formed a company that owns the freehold and are therefore joint directors in this company. As a result it is still a leasehold flat as there is still a lease and both the freeholder and leaseholder must abide by the lease, but each leaseholder is also part of the company that owns the freehold. Many people misunderstand this and I certainly don't know much about it, but there are others that do. Perhaps they could tell you more about the disadvantages of being a freeholder, or the link below might help.
http://www.ker.co.uk/residential-news/188-what-is-a-share-of-freehold.html

A lot of misunderstanding arises - as in a thread here recently - where flat owners do not realise that they are effectively wearing 2 hats in the share of freehold situation. As a shareholder in the freeholding company they are bound by decisions that the company may take, but as leaseholders they are free to enforce rights against and obligations on the freeholding company. Essentially you have to understand the legalities reasonably well and understand which hat you should wear when you take any decision or action.