Glossary · UK
What is Share of Freehold?
An arrangement where the leaseholders of a block of flats jointly own the freehold of the building, usually through a shared company, alongside holding their individual leases.
Full Definition
Share of freehold describes a flat where the leaseholder also owns a share in the freehold of the building, typically because all (or most) of the flat owners in a block have jointly bought the freehold together, most commonly through a specially formed freehold management company in which each flat owner holds a share or is a director. Rather than paying ground rent and service charges to an unconnected external freeholder, the flat owners collectively control the building, deciding on and approving the service charge budget, arranging buildings insurance, appointing (or acting as) the managing agent, and approving major works, since the leaseholders effectively are the landlord. Share of freehold is generally regarded as more attractive to buyers and mortgage lenders than a leasehold flat with an unconnected third-party freeholder, because it removes the risk of an external freeholder charging excessive or poorly justified service charges, imposing onerous lease terms, or being difficult to contact for consents (such as permission to make alterations or sublet), and it also usually makes lease extensions far simpler and cheaper, since the leaseholders effectively grant the extension to themselves at little or no premium (aside from legal costs) rather than negotiating with, and paying, an outside landlord. Leaseholders can acquire the freehold jointly either voluntarily, if agreed by all owners at the point of a building sale, or through the formal legal process of collective enfranchisement, which gives qualifying leaseholders a statutory right to buy the freehold from an unwilling landlord provided enough of them (normally at least 50%) participate.