What Does Buying a Freehold Actually Mean?
Understanding the distinction between freehold and leasehold is crucial. Freehold ownership signifies absolute ownership of both the property and the land it sits on, offering various benefits and responsibilities. However, there’s also an option to collectively purchase the freehold, known as share of freehold, which presents its own set of advantages and considerations.
In this guide, we’ll delve into the nuances of freehold ownership, explore the concept of share of freehold, discuss its advantages, costs, and responsibilities, and offer insights into transforming a leasehold into a share of freehold.
Most importantly, we’ll give you our expert insights into one key question: “What does buying a freehold actually mean?”
What Does Buying a Freehold Mean?
Buying the freehold of a property is a significant decision that offers individuals a sense of true ownership and autonomy over their home. Unlike leasehold arrangements, where ownership is temporary and subject to the terms of a lease, freehold ownership grants individuals absolute control over both the property and the land it occupies.
This empowerment comes with a range of benefits and responsibilities that shape the way homeowners interact with and manage their properties.
In this section, we will explore the advantages and obligations associated with freehold ownership, shedding light on why it is often considered the preferred choice for many property buyers.
Benefits
- Absolute ownership: Unlike leasehold properties, where ownership is limited by a lease agreement, freehold ownership provides complete control over the property.
- No ground rents or service charges: Freeholders are exempt and therefore do not have to pay ground rent or service charges to a landlord, providing financial savings in the long run.
- Greater control over alterations: Freeholders have the autonomy to make alterations and renovations to their property without seeking permission from a landlord.
Responsibilities
- Maintenance and repair: Freeholders are responsible for maintaining and repairing the entire property, including external structures such as roofs and walls.
- Property insurance: Freeholders must secure property insurance and cover associated costs to safeguard their investment.
- Compliance with regulations: Freeholders are obligated to adhere to legal and local regulations, and obtain necessary planning permissions for any modifications to the property.
What Does Buying a Share of a Freehold Mean?
If you want to buy the freehold of a flat, you’ll need to collectively purchase the freehold of the building with other leaseholders that qualify for collective enfranchisement.
Collective enfranchisement is the process by which leaseholders collectively purchase the freehold of their property, offering an alternative to traditional leasehold ownership. This results in joint ownership of the freehold, known as a share of freehold, or a collective freehold purchase.
For freehold flats to qualify for collective enfranchisement, certain criteria must be met:
- Leaseholder Qualification:
- Your lease must have had an original grant term of at least 21 years.
- Ownership of no more than two flats within the building.
- Building Qualification:
- Qualifying leaseholders must hold at least two-thirds of the units within the building.
- The building must be self-contained or a self-contained part of a larger building, with clearly defined vertical divisions and easily separable services.
- The building must comprise of at least two flats.
- Commercial or non-residential usage must not exceed 25% of the total floor area, excluding common parts.
- At least half of the units within the building must participate in the collective enfranchisement project, and all participating units must belong to qualifying leaseholders.
For a comprehensive overview of eligibility criteria, refer to the Full Eligibility Criteria at Lease Advice.
Advantages of a Share of Freehold
- Reduced costs: Purchasing a share of freehold typically means you can charge yourself lower fees than an external freeholder would.
- Increased control: Share of freehold grants individuals greater control over their property compared with leasehold property, as decisions regarding maintenance, renovations, lease extension requests and other matters are made collectively.
- Shared responsibilities: Co-freeholders share responsibilities such as property maintenance, insurance, and decision-making, distributing the burden among multiple parties.
Shared Responsibilities in a Share of Freehold
- Collective decision-making: Co-freeholders must collaborate on major property decisions, ensuring consensus on matters affecting the property.
- Maintenance and upkeep: Responsibilities for property maintenance and upkeep are shared among co-freeholders, promoting shared accountability.
- Financial management: Co-freeholders must manage finances related to property expenses, including insurance premiums, repairs, and other costs.
How Much Does It Cost to Buy the Freehold of a Property?
The cost of purchasing the freehold of a leasehold property varies depending on a large number of factors, including the property’s valuation and purchase price, location and local property prices, and any associated fees. For flat owners, to estimate the value of your share of freehold, you can utilise our Freehold Purchase Calculator, which provides an instant estimation based on relevant inputs.
If you are looking to collectively purchase a building’s freehold, a freehold purchase project manager can support you every step of the way. From insider expertise to paying the premiums and signing the contracts, you can trust the experts to help you complete this process successfully and efficiently.
Closing Thoughts
In conclusion, understanding the nuances of freehold ownership and share of freehold is essential for individuals navigating the property market.
While freehold ownership offers autonomy and control, share of freehold presents a viable alternative for budding flat owners, providing advantages such as reduced costs and shared responsibilities. Regardless of the chosen path, seeking professional advice tailored to individual circumstances is paramount.
For expert guidance on freehold purchase and share of freehold arrangements, contact The Freehold Collective today.
What Does Buying a Freehold Mean? FAQs
Can you turn a leasehold flat into a freehold?
While a leasehold house can have its entire freehold purchased, freehold and leasehold properties differ in terms of freehold acquisition, and it is not possible to convert a leasehold flat into freehold property outright. Instead, you can opt for a share of freehold, which is widely regarded as the optimal way to own a flat or apartment in the UK. Share of freehold allows leaseholders to collectively purchase the freehold of their property, providing them with greater control and autonomy over the building itself and how it’s run.
What are the disadvantages of buying a freehold?
The disadvantages of buying a freehold are relatively minimal, primarily consisting of increased responsibility for property maintenance and management. However, many individuals view these responsibilities as worthwhile trade-offs for the benefits of absolute ownership and freedom from ground rent and service charges. You can also appoint a professional managing agent to handle most of these responsibilities for you.
What happens when you collectively buy a freehold?
When leaseholders collectively purchase a freehold, they engage in a process known as collective enfranchisement. This results in joint ownership of the freehold, referred to as a share of freehold. With a share of freehold, co-freeholders enjoy reduced costs, increased control over property decisions, and shared responsibilities for maintenance and management.
