Sometimes, somebody who is selling a share of freehold flat may not fully understand what they own. They may think that if they have a share of freehold, why are people asking questions regarding leasehold elements and why do they need a lease? Someone who is buying a share of freehold flat may have similar questions or they may wonder that as they are buying a flat, what is this freehold business all about?
When you own a share of freehold flat, both the leasehold and the freehold elements are important. When you own a share of freehold, you own a flat which is held under a long lease but you also own the freehold jointly with the other flat owners in the building. You, in effect, have two roles.
On the one hand, you have the role of leaseholder which means you own a lease of the flat and you are obliged to observe and perform the leaseholder covenants and you have the benefit of a number of rights which are contained in the lease.
You also have a role as a joint freeholder which you have jointly with your fellow co-freeholders. The role of a freeholder would mean that you would have to observe and perform the freeholder’s covenants contained in the lease.
Some people wonder why there needs to be a lease when you obtain a share of freehold. Having a lease is very important. The lease defines the flat so that it is clear what part of the building you own. The lease also contains a large number of conditions which benefit your ownership. It contains details of the rights which you have in connection with your ownership, such as being able to pass over parts of the building in order to access the flat, rights of support from other flats, rights to enter upon other parts of the building where necessary to maintain the flat and rights to use communal facilities such as bin stores. It also contains a large number of rules and regulations which you and the other flat owners would need to observe and perform in order to ensure smooth management of the building, in order to prevent flat owners from causing a nuisance to other flat owners and in order to make sure flat owners contribute towards shared expenses.
The lease will also contain the freeholder’s covenants which are obligations and services which a freeholder has to perform. These include management, repair and maintenance of the building, including maintaining the structural parts and exterior parts, roofs and foundations of the building and also insuring the building. The benefit of having a share of freehold is that you have more of a say in how your building is managed and run. These decisions would need to be discussed and decided with your co-freeholders and you would be able to jointly decide when and how repairs and maintenance are carried out.
When you have a share of freehold property, the lease is very important if you wish to take out a mortgage on the property. The lender will require the flat to be defined and have its own title so that their charge can be registered against the property’s title. The lender will also require various rights, rules, regulations and other management provisions which are normally contained within a lease. There are other ways of holding a flat, such as a freehold flat or commonhold, but these are not common and are not widely accepted by lenders at present.
In addition to having more control regarding management and maintenance of the building, a share of freehold offers other advantages. This includes extending the lease to 999 years for no premium and reducing the ground rent to a peppercorn (so in effect you do not pay ground rent).
If you are preparing to sell or buy a share of freehold property, or if you own a share of freehold property and wish to extend your lease, feel free to contact Brian Craig on 020 7703 5034 or email@example.com
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