Exploring The Pros And Cons Of Owning The Freehold Of Your Flat
The decision to own the freehold of your flat is a significant choice that comes with both advantages and disadvantages. You and your fellow freeholders may be considering acquiring the freehold of your property for a number of reasons, i.e. current bad management of the property or extortionate service charges/ground rent.
Freehold ownership means having control over the entire property, including the land it sits on, but it also involves responsibilities and potential drawbacks. In this article, we will delve into the pros and cons of owning the freehold of your flat.
- Absolute Control and Freedom: One of the most significant advantages of owning the freehold is the absolute control it grants you over the property. You have the freedom to collectively make decisions regarding maintenance, renovations, and alterations without seeking permission from a landlord or management company.
- Purchaser Appeal: Potential buyers often find freehold properties more appealing, as they come with fewer restrictions and uncertainties compared to leasehold properties. They generally also come with very long leases. This can be a strategic advantage if you plan to sell the property in the future.
- No ground rent: Freehold ownership eliminates the need to pay ground rent, a fee often associated with leasehold properties. This can result in long-term cost savings, making freehold ownership financially appealing.
- Long-term Security: Freehold ownership provides long-term security as you don’t need to worry about the lease running out. However, there is a misconceived belief that if you own the freehold, you do not need a lease. This is incorrect. There must still be a lease in place that will set out the responsibilities of the tenants and the freehold company as to how the building is run. The advantage of owning the freehold is that as joint freeholders, you can grant each other 999-year leases meaning that the leases will never have to be extended.
- Legal and Administrative Obligations: Freehold ownership involves legal responsibilities and administrative duties. Managing insurance, dealing with property disputes and dealing with the maintenance and repair of the property can be time-consuming and challenging. Many freeholders hire property management companies to handle these aspects, although if the property is small (say, four flats) then it may not be too difficult to run things “in-house”.
- Freeholder Disputes: In collectively owning the freehold of a property, it is inevitable that not all freeholders will agree on all matters. It is beneficial therefore to set up a freehold company when acquiring the freehold, with freehold Company Articles, which will set out the way in which the property is run, including voting rights, decision-making, etc.
Owing the freehold of your flat is a decision that requires careful consideration of both the advantages and disadvantages. While it provides unparalleled control and potential financial benefits, it also brings increased responsibilities that need to be considered.
If you have any questions or would like further advice on the above, then please call us on 01444 708 640 or email us at firstname.lastname@example.org.