What does 'Freeholder' mean when buying a property?
Find out what Freeholder means when you are buying a property. 'What does Freeholder mean?' plus over 150 other property related terms and jargon in plain English
Freeholder
A person who owns a building and the ground on which it sits is a freeholder. Most house owners (but not all) are freeholders while most apartment owners are leaseholders.
Where there is both a freeholder and leaseholders the freeholder has sold the leaseholders a "lease". This is a right to live in a property for a certain number of years (known as the Lease Length) for a one off payment.
If you see a property advertised as "Leasehold flat with 144 year lease of r £X" you are effectively buying the rights to live in that apartment for the next 144 years after which, theoretically, you must give it back to the freeholder. It never actually comes to this though because you have rights under law to purchase a lease extension.
The freeholder is usually obliged to maintain the building in a good state of repair while leaseholders are obliged to pay the freeholder an annual sum of money to cover these costs - this is known as the Service Charge.
The freeholder can be anything from a person to a foreign bank as freeholds can be bought and sold on the open market.
Freeholders are therefore often more investors rather than building maintenance orientated and so they will contract out many of their obligations to a Managing Agent.
To find out more about the role of the Freeholder, because one will be involved in your property purchase, pick up a copy of my ebook How to Really Buy a Property.
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Search Results for 'freeholder' in
How to Really Buy a Property
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Chapter 12:
Choosing a Conveyancer or Solicitor
"... friend, for example, may have bought a brand new apartment where the builder has an experienced legal team that drew up a full set of papers months ago. A solicitor has to be seriously incompetent to cock up that transaction whereas they only need to be mildly incompetent to mess things up with your Victorian leasehold where the freeholder who produced the lease is a bank in Japan or the Earl of..."
Chapter 14:
Viewing Properties and Making Offers
"... property that is leasehold can be bought for a certain number of years. As an example, a leasehold flat might have seventy years left on the lease. If you buy this property it is on the understanding that you will give it to the freeholder in seventy years time, for free. The freeholder is the ultimate owner of the property. It is important to be aware that a leasehold property is not necessarily a flat or apartment. England and Wales are awash with Leasehold houses as..."
"... a freeholder: When the owner of a building sells off parts of that structure as leaseholds he is saying, "For this amount of money, you may use this part of the building for the next one hundred years. After that time you must give it back to me as I gave it to you." That is the basis of leasehold. The Freehold is a separate entity to the leasehold flats and can be sold with the leaseholders hardly noticing. As such the freeholder at the time you buy a property may be different a week later!..."
"... Lease: What the freeholder expects of you and what you expect from the freeholder over this hundred year period is laid out in the lease. This includes who should maintain what, when and how. It may also dictate what pets you are allowed, restrictions on changes you can make to the property, even where you are, and are not, allowed to hang your laundry out to dry! There are thousands of freeholders and because of this all leases are not the same. In fact there are probably tens of thousands of differently worded leases in any one..."
"... Ground Rent: The freeholder is the person who owns the land beneath the property and the structure itself, you are simple leasing a section of it. As such he will usually charge you rent for this land. The term for this is Ground Rent. The amount you will need to pay varies dramatically but for flats it is usually between £10 and £500 per year. The lease can allow for this amount to increase as the length of the lease..."
"... a Service Charge: This is usual where the building has been split into flats or has been built as a block of flats. The freeholder is responsible for maintaining the external structure from repainting the external walls to replacing the roof. It's the dull and boring side of being a freeholder and so he often hires managing agents to do the job for him. Whether or not he does, you will need to contribute towards these costs. He is responsible for doing them but you are responsible for providing the funds. The exact ins and outs of how this works, what he is responsible for, what percentage you must contribute and a whole lot more are laid out in the..."
"... the Lease: You may not be particularly happy about giving the property back to the freeholder after seventy years. The good news is that whether he wants it or not, if you have used the property as your main residency for the last year, you can force an extension on the lease. There will be a fee and this is usually calculated at what the property is worth now compared to how much it will be worth after the extension is granted. As such a twenty year extension on a property with a one hundred year lease is considerably cheaper than it would be on a property with a fifty year lease. As an example increasing a lease length from one hundred years to one hundred and twenty years may increase the value of the property by £2,000. In other words an amount too small to be recognisable . A reasonable fee for the freeholder to charge you would be £2,000 plus legal and administrative costs. For a fifty year lease the extension may increase the value of the property by £50,000. and so that would be the fee (again plus legal and administrative costs). If your freeholder wants an unreasonably large some it is possible to demand arbitration. A "reasonable" amount will be decided and both parties must abide by..."
"... Changes to the Property: You are in essence renting the property for a number of years. When, theoretically, you come to give it back the freeholder will reasonably expect it to look they way it did when he sold the lease. As such any substantial changes must be approved by the freeholder in writing. These might be the removal of a door or the addition of a conservatory. If it makes a difference to what is on the lease, you'll need his permission. He will grant this in writing by either producing a new lease or by issuing a deed of..."
"... all the charges to pay and restrictions to adhere to on a leasehold property it is not surprising that many Leaseholders decide that they would like to own the freehold of the building in which they live. Under certain conditions they have the right to buy the freehold from the freeholder at a "reasonable" price. It's a lengthy procedure but increasing in popularity, especially as it has a perception of adding value or desirability to a..."
"... Shares: If you buy a Share of Freehold property you will also be buying shares in the freehold company, 25 Free Street Ltd in the example above. The shares will have been issued when the leaseholders bought out the freeholder. They may have simply split them equally (one third each in the example above) or unequally if there is a difference in floor space between the flats. To demonstrate this Flat A may be the top two floors at 25 Free Street while Flats B and C are only on one floor each. As such Flat A may get 50% of the shares and Flats B and C would get 25% each. While that is very nice for Flat A it would also mean that the owner would be responsible for 50% of the maintenance and repair..."
"... Changes to the Property: Many people confuse Share of Freehold with total freedom! Someone who owns a share of freehold is still a leaseholder and must get the permission of the "freeholder" before making any substantial or structural changes to their property. This means agreement from all those in the building who have a percentage stake in the freehold company. As such staying friendly with your neighbours is far more important in a share of freehold situation than if you are a leaseholder! Once again any agreed changes must be spelt out either in a new lease or in a deed of..."
Chapter 17:
The Property Buying Process in Theory
"... was a structural part of the property.
The Lease (Leasehold and Share of Freehold Only) - This comes from the vendor's solicitor and defines what the freeholder expects from you as a leaseholder. See Chapter 14: Viewing Properties and Making Offers
Service Charge Accounts (Leasehold Only) -..."
"... Rent Receipts (Leasehold Only) - the ground rent is a charge made by the freeholder. Again the last three years receipts will be sought by your solicitor in order to make sure the premiums are not excessive or rising sharply. Any debts that the vendor may have with the freeholder are identified here and are also extremely important. As with the service charge, ground rent debts are also based on the property. If you buy when there are outstanding debts they will become your..."
"... to Assign (Leasehold Only) - for most purchases this is a formality. It is a document from the managing agents or freeholder saying they accept you as the new leaseholder. There are some blocks, however, where you will have to provide character references, proof of your financial status and sometimes even attend for an interview. They are rare and, more often than not, in the upmarket apartments of Mayfair and..."
"... of Variation (Leasehold Only) - when a lease needs to be changed the freeholder may decide that writing an entirely new lease is timely and costly. As such they will issue a deed of variation to the lease to confirm that something in the lease is not true or to make an addition to the..."
"... may be that he has withheld the cleaning charge because no cleaning has occurred!
Leasehold only: The vendor owes the freeholder money but is refusing to pay it because he is in dispute with them.
Leasehold only: The freeholder is absent (has gone missing and no one knows where they..."
"... is in dispute with them.
Leasehold only: The freeholder is absent (has gone missing and no one knows where they are!) and so no ground rent payments have been made. Your solicitor may be concerned that he will reappear and want to claim the outstanding debt from you.
Leasehold only: Your..."
"... he will reappear and want to claim the outstanding debt from you.
Leasehold only: Your solicitor does not think a deed of variation is adequately worded and wants a new one drawn up. The freeholder is offended and refuses to do so
- Requesting Further Enquiries -
With so many pitfalls in..."
"... With so many pitfalls in the documentation it is not surprising that your solicitor may want to ask further questions of the vendor, his managing agents or his freeholder. Much of this comes from the fact that there are no definitive protocols for the forms and documents that pass between them.
..."
"... Approval (where applicable): From the vendor or, if he does not have them, from the local council.
The Lease (Leasehold and Share of Freehold only): From the freeholder or freehold company.
Service Charge Accounts (Leasehold only): From the managing agents or from the freeholder if he has..."
"... (Leasehold and Share of Freehold only): From the freeholder or freehold company.
Service Charge Accounts (Leasehold only): From the managing agents or from the freeholder if he has not appointed managing agents.
Ground Rent Receipts (Leasehold only): From the freeholder.
License to Assign..."
"... Accounts (Leasehold only): From the managing agents or from the freeholder if he has not appointed managing agents.
Ground Rent Receipts (Leasehold only): From the freeholder.
License to Assign (Leasehold only): From the freeholder.
Deeds of Variation (Leasehold and Share of Freehold only,..."
"... the freeholder if he has not appointed managing agents.
Ground Rent Receipts (Leasehold only): From the freeholder.
License to Assign (Leasehold only): From the freeholder.
Deeds of Variation (Leasehold and Share of Freehold only, where applicable): From the freeholder or the freehold..."
"... only): From the freeholder.
License to Assign (Leasehold only): From the freeholder.
Deeds of Variation (Leasehold and Share of Freehold only, where applicable): From the freeholder or the freehold company.
Share Certificate (Share of Freehold only): From the freehold company.
What Can Go..."
"... been changed within the last three years and the previous agents are refusing to pass on any documentation.
Leasehold only: The freeholder is extremely slow to provide ground rent receipts
Leasehold only: The freeholder is absent (has gone missing and no one knows where they are!) and so no..."
"... only: The freeholder is extremely slow to provide ground rent receipts
Leasehold only: The freeholder is absent (has gone missing and no one knows where they are!) and so no ground rent payments have been made.
Share of Freehold Only: Some of the parties who own part of the freehold are..."
"... consent or building regulation approval if structural changes or additions have been made to the property
Leasehold only: Who the managing agents are and who the freeholder is
Share of Freehold only: The last three years accounts
Share of Freehold only: A share certificate
Details of..."
Chapter 19:
Time Costs Deals
"... and Mark instructed a solicitor who was not only painfully slow, but also painfully thorough to the extent that the sale dragged on for ten weeks. Their solicitor added new enquiries each week including a request that the freeholder should have all the windows in the building assessed, and get quotes for repainting and repairs, before they would..."
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