Buying freehold property is the closest anyone can get to owning property outright in English common law. With blocks of flats, the freeholder owns the building structure, the land it stands on, the roof, foundations, load bearing walls, gardens, landings, paths, gates, fences, drives, stairways, and any other outbuildings. Inside the freeholder owns plant rooms, lift motor rooms, and meter cupboards. All of these areas, both inside and out are collectively known as the common areas. Their management is covered by the requirements of the Health and Safety Executive (HSE) which enforces most health and safety matters and the Courts view these areas as workplaces, just as they do commercial properties.
A freeholder can be an individual, a finance company, a mixed use company (owning both commercial and residential properties in the same development, and in the social housing sector, local authorities. A resident management company can also be a freeholder.
Some blocks of flats have more than one freeholder because whilst a freeholder holds what is known as a ‘superior’ lease, they can choose to sell what is called an ‘intermediate’ lease to someone else, who is known a head-lessee. This then results in 3 different levels of ownership in the building:
- The freeholder who has the highest level of overall ownership;
- The head leaseholder (also called the head lessee) who is directly responsible to the leaseholder;
- The leaseholder.
Freeholders also have the ultimate sanction against leaseholders who breach the terms of their lease in their right of forfeiture, the taking back of the lease (and therefore the property) before its natual expiry. Such breaches will be financial (i.e. service charge arrears), those of disrepair or both. More on forfeiture can be read here.