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A Guide to Tenure: Freehold, Share of Freehold, and Leasehold.

Updated: Apr 26, 2022

In this article we explain the basics of typical tenure types, looking at the differences between purchasing a Freehold, Share of Freehold, or Leasehold property.




Freehold


Owning a property Freehold means that you own the building outright along with the land that it sits on in perpetuity - there is no time limit to your ownership.


When you buy a Freehold property you won't need to pay a ground rent, or seek approval from a Landlord for any changes that you may wish to make to the property. You'll be responsible for the repair and maintenance of the entire property, so it's important to get an idea of costs you're likely to incur during your ownership.


Leasehold


When you own a property Leasehold, you don't own the land. Instead, you effectively rent the property from the Land owner (the Freeholder) for a finite period.


Often, the Freeholder appoints a Managing Agent that will manage the estate on their behalf. The Managing Agent will deal with the upkeep and maintenance of the property and grounds, and finance this via a Service Charge paid by all of the Leaseholders within the estate.


When purchasing Leasehold, ensure you have made consideration of the below:


- How much tenants pay for Service Charge

- What is included within the Service Charge

- What is the length of the Lease

- What is the cost of the Ground Rent

- How often does the Ground Rent increase

- Who is the Managing Agent

- Is there a sinking fund in place


Share of Freehold


Typically, when a property is advertised as Share of Freehold it means that the purchaser will own a share of the company that has been set up to purchase the Freehold.


The idea of owning a share in the Freehold company means that all of the owners (for example, in a block of flats) can make the decisions that would otherwise have been dictated by the freeholder - for example, how the building is managed, and whether a managing agent is employed.


Similarly with purchasing leasehold, the purchaser must enquire and seek confirmation in relation to Service Charge provisions, Sinking Funds, health of the freehold company, and what management provisions are in place.


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