Land and property ownership in England and Wales is categorised in one of three legal ways: freehold, leasehold and commonhold. This ownership, or tenure, will dictate the type of conveyancing you require when you buy or sell.
Commonhold is a relatively new way of owning property in England and Wales, introduced by the Commonhold and Leasehold Reform Act as an alternative to leasehold. It applies to flats or apartment blocks where individual owners come together to form a legally bound commonhold association that holds the freehold of the structure. However, few properties have actually been sold as commonhold since the Act became law in 2005.
While commonhold is relatively rare in England and Wales, owners of leasehold flats or apartments are more likely to buy a share of freehold. As with the principles of commonhold, a share of freehold is when a group of residents come together to buy the freehold from the landlord and establish an association of their own that will then manage the property and land.
Each flat owner owns a share of the freehold land the building stands on, but the legal status of the flat itself is that it is still bought and sold as leasehold. However, you as the owner will have greater control over your home.
The advantage to having a share of freehold is that the residents are in control of the association that owns the freehold and so can grant much longer leases on individual flats; for example, up to 999 years, which would mean in effect you own your flat in perpetuity. The association can also set ground rents at a much lower level, reducing the outlay for residents.
However, when you buy a share of freehold, you have a share in the common areas of the building, including roof, walls, stairwells and hallway. You are responsible, alongside the other residents, for the upkeep and maintenance of the common areas and must insure the land and building.
There are advantages to buying a property with a share of freehold:
- Freeholders can grant longer leases at reduced premiums
- Freeholders can agree to vary the terms of a lease
- Freeholders can decide who provides services to minimise service charges
As with any shared property situation, there are potential disadvantages to buying a property with a share of freehold.
- The process of buying a share of freehold may be complicated, lengthy and expensive
- Not all freeholders may agree on specific decisions, making them difficult to implement and enforce
- Lenders may not be happy with the arrangement and unwilling to lend on this type of property
It’s important to instruct a solicitor or specialist conveyancer who has experience in dealing with commonhold or share of freehold property conveyancing. In-Deed’s nationwide panel has the expertise to ensure your purchase or sale proceeds smoothly.
As with leasehold property, there is more work involved in buying commonhold as the solicitor must deal with the commonhold association and also ensure what rights and obligations you will have as the new owner.