Share of freehold

[hairyunicorn]

So I have just been to view a property (2 bed flat) and I'm torn. It has a tiny kitchen and bathroom and as its top floor has weird but large bedrooms and a decent sized living room.

However to combat that, it is share of freehold with no service charge and off street parking.

The other flat is ex council, in a small block with good sized rooms and a small balcony, no parking.

I prefer the ex council but my head is saying share of freehold in London is not something to be passed up. It's at the top of my very tiny budget but surely it will be worth pushing for?

Also the block could be subject to charges . Not even asking any questions, just needs to get it out.

I should go for the 1st flat shouldn't I?

No service charge is not a good thing. How can any maintenance take place? Commonway lighting, building insurance etc?

Share of freehold is good as you have more say over the running of the block and you won't need a lease extension, but the block still needs to be maintained.

Yes. I would take a share of the freehold over the ex-council flat anyday. The size of the kitchen and bathroom might be a pain but so would a massive (& regularly increasing) service charge.

Plus off street parking in London is a jewel beyond price!

Share of freehold also makes it easier if you wish to alter the layout.

No service charge is not a good thing. How can any maintenance take place? Commonway lighting, building insurance etc?

The flat owners all have to put their hands in their pockets. However, unlike a service charge, they do it as and when req'd and have full control over how much they are willing to pay and exactly what is to be done.

There are 3 flats in the converted house. 2 are share of freehold and 1 is lease hold. Apparently the rent form the lease hold is used to pay building insurance and do minor works. Anything else is split between the 3 flats.

Honestly share of freehold isn’t that rare in London and leasehold, particularly in a converted Victorian, isn’t really that restrictive. I wouldn’t let that be the defining characteristic of your search.

@SoapySponge yes, I think your correct, share of freehold and off street parking trumps small kitchen/ bathroom and weird shaped rooms.

Think I will put in a cheeky offer and see where it goes. It only came on the market today.

I'm not sure what you mean by the "rent" from the leasehold flat. Ground rent wouldn't be enough to cover the expenses, it's possible though that a lease extension happened at some point.
To be honest it sounds pretty good. But bear in mind you will still have a lease that you have to abide by. The difference is the term of lease is likely to be 999years

Share of freehold is common in London.

I would choose that flat over the ex council one due to it likely holding it’s value better when It comes to resale. Ex council properties don’t appeal to some buyers so it limits your market somewhat. Though they do tend to represent good value for money in terms of square footage for your money.

Share of freehold is not common in London, having brought and sold 3 times now. I can count on 1 hand the amount of freehold flats (in my price bracket) that i have seen.

By rent, i meant the fee paid by the leasehold flat. i don't know the tec term for this. sorry

The ‘fee’ paid by the leaseholder is ground rent as a PP has said.

It may well be low and if it isn’t, it’s extinguished by a leasehold extension. Relying on it to pay for anything is a bad idea.

I wouldn’t touch a flat with no service charge. There should be a regular service charge as otherwise any sums due land on the current occupant rather than being saved up for over the years proceeding.

If this is at the top of your budget, can you afford a sudden bill of £30,00 as your share of replacing the roof (for example)?

The horror stories come from properties where the leaseholders have no control over the service charge. I’ve lived in two flats. One was share of freehold but it was set up so the freehold was held by a company and each occupant owned 1 share. There was a regular service charge.

My current flat gives control over the management and therefore the service charge to the leaseholders (in the lease so legally binding). Again there is a monthly service charge.

It means there shouldn’t be any unexpected huge bills because the savings are there.

the lease hold flat pays a service charge as well as ground rent.

In this set-up, 2 of the 3 flats are freehold with the other flat being leasehold. The service charge on leasehold flat covers the buildings ins and small minor works.

Unless the property has a sink fund, where all of the service charge is paid into cover any extra works, all flats would have to pay for extra works.

My current flat charges a service charge but has no sink fund (it goes to the freeholder) so when the flat roof failed all flats had to pay their share despite paying a yearly service charge. So i am not too concerned by having no service charge.

My flat before this one was also leasehold with no service charge, in 15 years i paid around £3000 in charges for works, but has to pay £55k to renew the lease, hence why freehold is so attractive to me.

The cost to extend a lease only comes in that region if you let it run right down to under 80 years, or if you bought it very low in which case the purchase price will reflect what.

A normal lease term of around 120-150 years costs a nominal amount to extend.

Leasehold is really not that restrictive or expensive. My leasehold flat in London has ground rent of £200, it’s just 2 flats in a Victorian conversion and the lease is long. There’s really been no difference over the past 9 years if it was freehold vs leasehold.

Yes, my ground rent is low, £150 per yr, but the service charge is £1500 pa.

In my price bracket most flats have under 110yrs on the lease. I have been looking at flats with 110 + yrs and the renewal frees are coming in at around 10k+, so much more than a 'nominal amount to extend'

Sadly my lease did get down to 79 yrs, i just didn't have the money to renew until i sold.as i was a sahm at the time :(

Leasehold share of freehold ( different from freehold) is very common in North London. Maybe uncommon in the part of London you’re in.

It's quite hard to unpick what you've said.

It would be almost impossible for there to be a mechanism through which the leasehold flat pays service charges and the share of freehold flats don't.

Again, in your current set up the service charge may be collected by the freeholder but not paid "to" the freeholder.

It's really important to understand the difference between ground rent and service charges.

Just because you have a share of freehold, you are still a leaseholder as well. They are separate legal entities. If major works needed to happen you could be forced to stump up a big sum of money and with the freeholders not collecting service charges to keep up with the maintenance then you will have to stump it up. It is much better to have a regular service charge with a sink fund to help fund any expenditure you have.

A lot of share of freeholders have fallen into this trap. Thinking if we buy the freehold we then won't have to pay out XYZ for service charges. The building gets run down and then you have bigger bills to pay out.

Make sure you go into it with your eyes wide open as you will need to get on with the other freeholder to work things through.

I'm not sure what you don't understand?

Had a very long chat with the estate agent and confirmed, 2 of the flats are freehold and pay no service charge. They own the freehold.

The leasehold flat pays a service charge. This is then used to pay the building ins and any minor works.

I have no issue not paying a service charge and paying for works as and when.

In my 1st flat this was the set up and it caused no issues. We spilt the cost of works between all the flats and had work done when needed.

My current flat is leasehold, charges a service charge and has no sink fund. The service charge goes direct to the freeholder. Hence when the flat roof failed we all had to pay our share dispite paying a service charge of £1500 pa.

With share of freehold if, say, the roof needs major repairs and there’s no “sinking fund” created by payment of service charges (as it would be in a normal leasehold set up) think about how you are going to ensure all the freeholders do in fact contribute. How can you ensure they have the funds and/or will actually pay (the ground floor flat might take the view that the roof is nothing to do with them)? Do you have the resources to take them to court to force payment? Are there insurance products that can protect you?

I own several leasehold properties and have always turned down the opportunity to buy the freehold for exactly these reasons - it’s a potential minefield

This. I own a share of a freehold (I'm also a leaseholder on a long lease). We (the freeholders) have regular meetings to discuss ongoing maintenance and pay a regular service charge to build up a sinking fund. Without reserves, you may need to pay several thousands of pounds for e.g. roof repairs and persuade other residents to contribute. have you had a look at the lease?

All the flats will be leasehold if the one you are buying has a share of the freehold. Whether the other owners also have a share of freehold (co-owners or via a limited company) is another question and your solicitor will look into it.

I would suggest downloading the lease from land registry.
Estate agents generally don't know how buildings are run.

It is vanishingly unlikely that what is currently happening is correct.

The lease should show the apportionment of the various flats. Sometimes this is just equal split, sometimes it is a defined percentage.

Even conveyencibg solicitors doing always understand leasehold.

I can assure you that I do.

Looks like I will need a solicitor to check the lease, as they accepted my offer :)

lol... now I'm scared