Freehold flat

A freehold flat is a flat where the owner holds the freehold of both the individual unit and a share of the building and land, rather than a long leasehold that runs for a fixed term and then expires. Freehold flats are relatively uncommon in England and Wales, the vast majority of flats are sold on a leasehold basis, with the freeholder owning the building and individual flat owners holding long leases, typically 99, 125, or 999 years.

What is a freehold flat?

In practice, a freehold flat can take a few different forms. In some older converted properties, individual flats are sold with a freehold title to that specific unit, creating what is known as a flying freehold, where the freehold of one property sits above or below that of another. Flying freeholds are viewed with caution by mortgage lenders because the legal framework for enforcing obligations between neighbouring freeholders is weaker than under a lease. Many lenders will not mortgage a flying freehold, or will only do so with additional conditions.

A more commercially structured alternative is commonhold, a system introduced in 2002 that allows flat owners to hold their unit on a freehold basis while jointly owning the common parts through a commonhold association. Commonhold is more legally robust than a flying freehold but has been very rarely used in practice. The government has signalled its intention to encourage greater use of commonhold as part of leasehold reform.

Why "never buy leasehold" is common advice

The phrase "never buy leasehold" has become widespread, particularly online, as a reaction to a series of well-publicised problems with leasehold flats in England and Wales. These include escalating ground rents that make properties difficult to sell or mortgage, onerous lease terms inserted by developers, high and opaque service charges, expensive and complicated lease extension processes, and the cost of enfranchisement, buying the freehold collectively with other leaseholders.

The Leasehold and Freehold Reform Act 2024 has made meaningful changes to address some of these problems, including making lease extensions easier and cheaper, restricting new residential ground rents, and improving transparency around service charges. However, the practical impact of these reforms is still working through the market, and leasehold still carries more inherent complexity and cost than freehold ownership. Our blog article on the Leasehold and Freehold Reform Act 2024 explains the changes in full.

Should you buy a freehold flat?

Whether a freehold flat is a good purchase depends on the specific legal structure. A well-structured freehold flat, for example, one held through a properly constituted commonhold or a share of freehold arrangement, can offer genuine advantages over a standard leasehold, including no ground rent, no lease running down, and greater control over the building's management. A poorly structured flying freehold, by contrast, can create problems with mortgage finance, insurance, and enforcing repair obligations against neighbours.

Key questions to investigate before buying any freehold flat include: will mainstream lenders mortgage it, how are the building's maintenance and insurance obligations structured and enforced, is there a management company or residents' association in place, and what is the legal basis for cost sharing between flat owners.

Buying the freehold of a flat

If you currently own a leasehold flat and want to buy the freehold, there are two routes. The first is collective enfranchisement, where leaseholders in a building join together to purchase the freehold collectively from the freeholder. The Leasehold and Freehold Reform Act 2024 has made this process more accessible by reducing the qualifying threshold and improving the valuation methodology. The second route is where the freeholder voluntarily sells the freehold, which can sometimes be negotiated directly.

Buying the freehold as a group creates a residents' management company, typically a limited company in which each flat owner holds a share, that then takes responsibility for the building's maintenance, insurance, and service charge management. This gives residents direct control but also direct responsibility.

For landlords who let leasehold flats, a shorter lease can affect the rental yield and resale value of the property. Extending the lease or participating in collective enfranchisement is worth considering before the lease falls below 80 years, at which point the cost and complexity of extension increases significantly.

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