Freehold vs Share of Freehold: The Key Differences
Whether you’re a leaseholder looking to extend your lease via your collective freehold, or a share of freehold owner looking to grant a lease extension to yourself or other residents of your block, there are a few key things you need to know about the process and associated costs.
Buying a property can be an exciting but daunting experience, especially if it’s your first time.
You want to make sure that whatever type of ownership title you go for suits your requirements perfectly. That’s why we’ve put together this comprehensive guide – so that by the end, you’ll have all the information needed to make an informed decision about which one is right for you.
So – let’s dive in!
What is the difference between a freehold and a share of a freehold?
When it comes to a freehold property, freehold owners are the sole owner of the property and the land on which their property is built. This usually applies to an individual dwelling or house as opposed to apartment blocks.
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This means that you have full control over how and when modifications can be made to the structure, as well as any rules or regulations associated with its use. Additionally, you won’t need to pay ground rent or service charges as you do with a leasehold property.
A share of freehold is most commonly associated with the purchase of flats, where flat owners will often own the leasehold for their individual flat and hold a share of the freehold for the entire building and the land it’s built on, collectively owning the whole freehold.
As a collective, those with a share of freehold have more control over their properties, as well as the ability to make decisions about how it is managed and maintained.
Freehold vs Share of Freehold: 6 Key Differences
- Type of home
The main difference between a freehold and a share of freehold is the type of home you are buying. This will decide all the other differences, like how much control you have over your property. Most flats are leasehold, but some houses can be too. So be sure to check what type of property you’re buying (freehold vs leasehold) before making your decision.
- Decision-making
When buying a flat, the decision-making power usually lies with the collective group of freehold share owners. You and other flat owners will then have shared control over how the property is managed, maintained and modified. This means that decisions regarding service charges, ground rent and other fees may be decided by this collective group.
In a freehold house, however, the individual owner has full control of the property and can make all decisions without involving any other parties or groups.
- Rights
When it comes to the rights that come with ownership of a freehold property, they can vary greatly depending on the type of property and your individual freehold agreement. For instance, when it comes to development rights, owners of freehold properties typically have full control over any modifications they wish to make to their property – subject to any relevant planning permission that may be required. This includes any changes to the structure itself or any rules and regulations associated with its use.
In contrast, a flat owner who holds a share of a freehold will usually need to gain the approval of their co-owners before making any modifications or changes. This is because the group collectively owns and shares responsibility for the entire property and its use.
- Management responsibilities
The person or company that owns the freehold of an entire block of flats will typically take on management responsibilities for that building – unless you hire a block manager or management company. These freeholder responsibilities include areas such as administration and maintenance, as well as any repairs or renovations that may be necessary.
If you own a freehold you will be solely responsible for these responsibilities, whereas if you own a share of a freehold, you will be collectively responsible along with your co-owners. Therefore, when it comes to making decisions about the property, it’s important to be aware of what type of ownership you have and the specific responsibilities that come with it.
Administrative tasks may include keeping track of all payments and bills, collecting service charges or rent from leasehold flats, ensuring building insurance is in place, organising meetings, and resolving any disputes between owners. Maintenance tasks may include regular inspections, repairs, and painting or decorating if required. Again with a share of freehold, you may delegate these tasks to a Managing Agent.
- Cost + pricing
When it comes to the cost of acquiring a freehold, whether a house or flat, the administration fees are generally similar. The price will depend on factors such as ground rent, the length of the lease and other factors. Generally speaking, the higher the ground rent and shorter remaining lease length, the more expensive it will be to purchase a freehold.
When it comes to freehold flats, the cost will usually be lower than purchasing an entire freehold building – because you’re only buying part ownership of the residential apartment building. Depending on how many co-owners there are and their respective shares, prices can vary greatly.
Unsure about costs? We have created a stress-free way to calculate it.
- Process of acquisition
To buy a house or flat, the process of acquisition is largely the same: you need to find a property that meets your needs, arrange for an inspection, obtain a mortgage (if necessary), and complete the necessary paperwork. However, when it comes to purchasing the freehold of a flat, the process of acquisition is entirely different.
To acquire the freehold of a flat, you will need to form a collective enfranchisement group and make an offer to the current freeholder. The offer should include a proposal for the price of the purchase, as well as any terms or conditions that you would like to negotiate.
Once your offer is accepted, the collective enfranchisement group will need to register with HM Land Registry and submit all necessary documents in order to complete the purchase.
It’s important to note that acquiring a freehold or a share of a freehold is a complex process that can be both time consuming and costly. That being said, it can also bring many benefits such as increased security of tenure and control over your property.
Should You Buy a Freehold or a Share of a Freehold?
So – which is right for you, a freehold or a share of freehold? The answer really depends on your individual property type, goals and budget.
If you’re looking for complete control and ownership of your property, then a full freehold may be the right option for you. It also provides greater security of tenure and could mean that you save money in the long run due to lower maintenance costs. If you are buying a flat, however, this may not be an option without forming a collective enfranchisement group.
A share of freehold may be more suitable if you’re looking for the benefits of ownership without the full cost and responsibility that comes with it. As long as you are comfortable sharing the responsibilities with your co-owners, this can be an attractive option.
Ultimately, the decision will usually be made for you depending on the type of property you’re looking to buy.
If you have a leasehold flat, you will have to buy a share of a freehold to acquire a freehold flat. For other leasehold properties like houses, the full freehold will likely be the only option.
Whichever option you choose, make sure that you do your research and take into account all the risks and costs involved before making any decisions. Good luck!
Still wondering if you should buy the freehold or share of a freehold?
Looking To Acquire the Freehold of Your Flat?
At The Freehold Collective (TFC), we are experts in freehold acquisition, and can help you obtain a share of your freehold along with other individuals in your building. We have years of experience in the field and understand the complexities involved, so you can trust us to provide the best possible advice and support.
For many flat owners, the prospect of acquiring a share of freehold can seem daunting – we get that. That’s why TFC offers a straightforward process with no hidden costs or surprises so that you have all the information you need to make an informed decision.
Freehold vs Share of Freehold FAQs
What is better: share of freehold or leasehold?
Share of Freehold is a type of property ownership which gives greater control and ownership to the flat owners. It enables the flat owners to take responsibility for any maintenance or repairs that need to be done on their property and also gives them more security of tenure.
How much value does a share of freehold add?
The minimum is around 1%, but we tend to see more like 5-10% in our experience. This is because it makes the property easier to sell, so buyers are willing to pay more for them.
What does having a share of the freehold mean?
Having a share of freehold in your property comes with many advantages as opposed to just having a leasehold. This is because it grants you greater ownership and control over the building, enabling you to have a voice in the management decisions. You will also gain security of tenure, as you won’t be at risk of being evicted at the end of a set lease period.
