Many flat owners who are conveyancing clients understandably do not appreciate the difference between leasehold and freehold. When you buy a flat you buy a lease, which is in effect a long-term rental contract. The freeholder owns the building and when each lease expires, the freeholder is entitled to have the flat back and create a new lease that may then be sold to someone else, subject to your rights to a short lease.
If you join with other leasehold flat owners and buy the freehold, you remain leaseholders but you also jointly own a company whose main asset is the freehold. This entitles you to increase the length of your lease – typically to 999 years – and abolish ground rent. Acquiring the freehold reversion or reversionary freehold also gives flat owners much more control over their homes. They can decide how their building should be managed and can best decide how to utilise the service charges. As an alternative, extending your lease also enhances the value of your property.