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Leasehold vs Share of Freehold

Conveyancing Solicitors are often asked to explain the differences which arise between the Conveyancing of a leasehold flat and one where the flat-owner has a share in the freehold.

Virtually all flats in England and Wales are owned with leasehold title. Even if the owners have acquired the freehold title the leases of the flats still continue – meaning that the owners are still bound by the lessee’s obligations contained in the leases – but the freehold is divided between the flat-owners.

For all flats (except the very rare ‘freehold flats’) it is still necessary to transfer the leasehold title, so buyers’ Conveyancing Solicitors will still have to carry out the usual work involved with such property transfers.

If you are considering buying an apartment advertised with a share of the freehold, obtain further advice from a Conveyancing Solicitor at the earliest opportunity.

What is a ‘share of freehold’?

  • When the freehold title has been transferred to the owners of the flats in a building, they each have a share in the freehold.
  • If there are more than four flats in a building, the freehold title will have to be registered in the name of a company of which the flat owners are members or shareholders. This is also usually described as a share of freehold.
  • Where the freehold of a large block has been acquired by some of the flat-owners, then only those owners or their successors will have shares in the freehold company, so not every owner in the block can be said to have a share of the freehold.

Situations which are not a ‘share of freehold’

  • Freehold flats – Having a share in the freehold title does not make the flat a ‘freehold flat’ – that is something quite different, as any Conveyancing Solicitor will be able to explain.…
  • ‘Cross-over’ leases – this is the phrase usually used to describe the situation where a building comprises two self-contained flats or maisonettes, with each owner having a lease of their property and also owning the freehold of the other flat.

Conveyancing issues where there is a share of the freehold.

If the seller has a share in the freehold then this will have to be legally transferred on completion.

If the freehold title is registered in the names of the individual flat-owners, then they will each have to sign a land registry transfer deed to enable the buyer to be registered as a new owner jointly with the owners of the other flats. Difficulties can arise if one or more of the other owners is absent or uncommunicative.

If the seller has a share in the company which owns the freehold, then the share must be transferred. This is straightforward as the seller just needs to sign a simple form which is handed over together with the original share certificate. The buyers’ Conveyancing Solicitors will need to arrange for the transfer to be registered by the company, which can be a problem if there is no-one carrying out the duties of the company secretary.

Some companies do not issue shares, in which case it is merely necessary for the buyer to apply to become a member after completion.

It is usual practice not to put any more than a nominal value on the transfer of a share of the freehold, but this may be done when the seller had to contribute to the cost of purchasing the freehold and the share has an ascertainable value.

After completion

Owning a share in the freehold does not mean that each flat-owner becomes solely responsible for their part of the building. It will usually be necessary to agree arrangements for the management of a building between all the owners. In the case of larger buildings it may still be advisable to retain a company to handle day-to-day management.

Buying a flat with a share of the freehold?

Your Conveyancing Solicitors will explain more fully the individual arrangements which apply to any particular property. Get a quote for Conveyancing Solicitors who will act fast, or phone 0800 038 6446

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