Almas Uddin
Founder and Mortgage Advisor
03 Feb 2020
If you are a home-owner, then it will be very likely that you also own the land your house is on. It’s hard to imagine that you wouldn’t own the property if you actually owned the house. However, when we look at multiple flats in a block, you can question who actually owns the land underneath, with many different people owning apartments in the building.
If you are a flat owner you are more than likely the leaseholder, and the chances are that you don’t have ownership over the land (the freehold), your lease will probably have a term of anywhere between 75 years and 999 years. If your contract expires in your lifetime the ownership of the property will return to the landlord (the freeholder).
Freehold
As mentioned above if you own a home freehold, you own the land and the building that it’s on, until the day that you decide to sell it.
Buying a property freehold is the strongest type of ownership a downside to this is, of course, the whole responsibility is yours too.
Share of freehold
Recently, the possibility to become a shareholder of the freehold has become much relaxed. This permits you to own your flat completely, however, this process works differently to owning a house freehold.
Fundamentally, the leaseholders can rally together, and due to some legislation changes in the past they can force the freeholder to sell the freehold to the leaseholders of the flats, the leaseholders then become shareholders of the freehold and in part then all owning a share of it. They then own their flats leasehold and a share of the building and the land it is on.
The flat will still be retained as leasehold but the new freehold establishment can give new leases, and lift restrictions on what they can do in the building, a peppercorn ground rent may still apply.
In most cases, this is more desirable for practical reasons for owning a flat freehold, which causes issues with mortgage lenders & insurance companies.
Acquiring a share of the freehold will then give you a share in the common areas of the building – hallways, stairs, railings etc. - and be accountable with the other communal holders for the upkeep of those areas and the building. The building insurance will also be something the establishment will be reasonable for.
How the share of freehold typically works
Basically, an establishment needs to be set up to manage the common areas of the building; duties are split with all part shareholders taking part in the wellness of the building.
The share of freehold can work out cheaper as owners will not be a victim to the over-charging endemic in the leasehold sector.
Shareholders, can negotiate their own service fees, find the most cost-effective buildings insurance and get a better price for building maintenances.
However, do not forget that with ownership comes accountability and it is imperative to do what is expected of you and categorise the necessities.
The price of a share of freehold flat could well be higher than a leasehold one, but any variance is likely to be comparatively small unless a leasehold flat has a short lease outstanding.
This would come from the fact that leaseholds dwindle over the years and so the nearer they get to the end, the less they are worth.
Here at Revolution Finance Brokers, we are independent brokers; our affiliation is with no one lender, our advice is based on your needs whether you have a leasehold or share of a freehold property. We cover London, Essex, Kent & its surrounding areas - Southend, Chelmsford, Colchester, Walthamstow and more.
Before we speak to any lenders will we fully understand your situation and based upon that we will secure the best possible products, at the best reasonable rates.
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