Q: I am buying a flat that is being marketed as having a 'share of freehold'. Please explain what that phrase actually means, whether there is still a lease and whether I need consent to alter the flat after I purchase it.
A: Buying a share of freehold means that you will acquire a shared ownership of the freehold title relating to the building, as well as a leasehold interest in the individual flat.
Usually the freehold title is registered in the name of a company in which the flat owners will be shareholders. Alternatively, the freehold title can be registered in the joint names of up to four individuals.
Owning a share of the freehold does not entitle you to simply ignore the terms of the lease. Accordingly, if the lease prohibits alterations without landlord's consent, breaching the terms of the lease could have costly consequences.
A lease is a wasting asset that will become less valuable the shorter it becomes. A key advantage of owning a share of the freehold is that the co-freeholders can agree to grant themselves 999 year leases, thereby protecting the value of their investment. Owning a share of the freehold also means that the lessees can have greater control of the day-to-day management of the building.
Owning a share of freehold can have its drawbacks. For example, the administration involved in the management of a building can be time-consuming. Poor management can lead to a range of problems.
You should note that acquiring a share of freehold is generally a good thing but doing so does come with its own issues. A good solicitor will help you to ensure that your share of freehold dream purchase does not turn into poorly managed building nightmare.
This article was first published in the September 2016 edition of the leading lifestyle magazine, The Resident.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.