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Another type of Resident Management Company is marketed as  ‘share of the freehold’ which means that at some point, leaseholders have exercised their right to collectively buy the freehold of their block of flats through setting up a company via what is known as a Nominee Purchaser. On completion they then become the new freeholders Whilst the flats will individually still be held on leases, all those leaseholders who took part in the freehold purchase become shareholders as the company will be one that is limited by shares. It is sometimes possible for leaseholders to buy into the freehold for which a premium will be payable, but a freehold company owned collectively by the leaseholders is under no obligation to sell a share in the freehold.

The main advantages in owning a share of freehold are:

  1. The leases can be extended at little or no cost to 999 years at a peppercorn rental (i.e. nil).  It is however important to take advice if there has been a considerable time lapse lapse between the tenants collectively acquiring the freehold and the new property company granting themselves extended leases;
  2. As the freehold is collectively owned by the tenants of the block, any changes to the terms of the leases that are causing problems (for example, pets or wooden flooring) can be varied so long as the majority of shareholders in the freehold company agree;
  3. The tenants have far more control over the day-to-day management of their building;
  4. The tenants have the ability to govern the level of service charges and insurance premiums levied as they are in control;
  5. The saleability of a flat with a share of freehold is generally increased. Often, a property is an individual’s most valuable asset and securing a share of freehold will protect it.

Note: The above was sourced from the article written by Katie Cohen of Child and Child.

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