Leasehold or Share of Freehold

When it comes to flats, apartments and maisonettes, we often get asked about the difference between a leasehold property and a share of freehold. In this article, we are looking to explain some of the differences and main advantages and disadvantages of both types of property tenure to help you make an informed decision about the property you are considering buying.

What is a Freehold, compared to a Leasehold or Share of freehold?

When buying a freehold property, you will own the full property and all of the land it is sitting on. These are often houses. The size and type of property can vary and they can still be a freehold, for example a detached house with a large garden, and a terraced back to back property can both still be freeholds. You can get some leasehold houses, although these a less commonplace these days and you can also get freehold flats, which are something different all together. You can read more about freehold properties here

What is a Leasehold property?

With a leasehold property, you will own a proportion of a larger property. The most common examples are flats, apartments and maisonettes. The leasehold may be a whole floor of a converted house, or it may be a flat in large block of many flats. Some leaseholds do come with outdoor space, gardens, parking spaces etc. But with a leasehold this will be (or should be) clearly defined, what you do own and what you don’t. With a leasehold property, you have a landlord who is responsible for the wider building and estate. When owning a leasehold, you often have obligations and restrictions on what you can and can’t do in the property and wider estate, whereas with a freehold property, there are often less, or no, obligations and restrictions, but the responsibility is often greater.

What is a Share of Freehold property?

Like with a leasehold, when owning a share of freehold property, you will only own a proportion of the property and land, but what you do own will be owned outright like in a freehold. Ownership is shared with other flats in the property so collectively you will be your own landlords. For example, if a Victorian 4 storey property is split into 4 flats, each flat owner will own one quarter of the freehold along with the leasehold of their specific flat. Where there are two flats, three, or 6 in a block, each owner will own a half share, a third, a sixth of the freehold respectively, so on and so forth. There is no limit on the number of shares a property can have. 

Who is responsible for maintenance and repairs with a Share of Freehold?

In a leasehold property, any maintenance and repairs of the wider estate fall to the responsibility of the landlord. But by the same token, you are answerable to the Landlord. They will have ultimate say over what is required, when and at what cost.

In a share of freehold, you will have a share of the responsibility for the upkeep of the property. This share is representative of the share of the property you own. You will have more say over what works are carried out and at what cost. At the same time, it is important to maintain a good relationship with the other share of freeholders to ensure any issues that come up are dealt with harmoniously.

An example of the difference here is any common grounds or gardens that the property has. In a leasehold property, it is likely that the Landlord will employ a gardening company to maintain the grounds and charge it back to residents by way of service charge. However in a share of freehold, the freeholders may collectively decide that the owners will take responsibility for a proportion of the gardens each, or one freeholder may be a keen gardener and volunteer to maintain the grounds, therefore negating the need for a gardening service and ultimately less costs.

Ground Rent and Service Charge

In a leasehold property, you are most likely to have to pay ground rent and service charge to the Landlord to cover the cost of repairs, insurance and expenses. Service charge will fluctuate if specific large repairs are required and the relevant notices served. While the Government has reformed ground rent on new leases, there are still some properties out there with significantly high ground rent rates.

When purchasing a share of freehold, it is also true that you will need to cover the costs of your proportion of shared costs, such as insurance, repairs and maintenance etc. However, we often see arrangements where ground rent is not paid as effectively you would be paying yourselves. As discussed above, by having more control over the management of the property, costs can be saved, or reduced in a share of freehold. For example, if major works are required to the building, the freeholders can obtain several quotes and have more say over which contractor they employ to carry out the works. Again, like with the garden, a resident with skills in a particular area may volunteer to carry out the work at a lower price, saving money overall.

How about lease extensions?

With a freehold property, you own the property indefinitely until you chose to sell, all being well. In a leasehold property, you are granted a lease for a set period of time, known as the lease term. It can vary in length, some being 999 years, some being 125 or 99 years, and anywhere in between. Once the lease term gets close to the end, you will need to arrange a lease extension, not least because a property with a short lease is harder to sell. In a share of freehold, you are also only granted a lease of the actual property you own for a set period of time, it is not indefinite. In a leasehold, you will need to approach the landlord to arrange an extension which can be costly. In a share of freehold, because you are your own landlord (along with the others), lease extensions tend to be easier and cheaper as it is in all of your best interests to extend the leases.

In Conclusion

If you are considering buying a flat, there are statistically more properties that are leaseholds than shares of freeholds. Whilst both types of tenure have their advantages and disadvantages, you should consider other factors when deciding on a property such as location, travel and commuter networks, whether it is a good title and whether you like the property and can see yourself living in it. From a conveyancer’s point of view, whether the property is a leasehold or share of freehold, is more of a technicality.

In any event, you should always seek the services of an experienced conveyancing solicitor who can investigate and understand the terms of the property you are purchasing and guide you through the complexities of your lease or share of freehold. At Express Conveyancing, we have been handling both types of property for a number of years and across the whole of England and Wales. Contact one of our team today, to discuss how we would approach your property transaction and answer any questions you have. Get in touch on 0800 7999892 or hello@express-conveyancing.co.uk today.