Share of Freehold vs Leasehold: What It Means for London Property Buyers

What Is Share of Freehold and How Does It Work?

Share of freehold means that the owners of flats in a building collectively own the building’s freehold — held through a residents’ management company (RMC) in which each flat owner holds a share. This is distinct from standard leasehold, where a separate freeholder retains ownership of the land and building structure, and from full freehold (common for houses), where a single owner holds both the property and the land beneath it.

In practice: individual flat owners jointly acquire the freehold of the entire building through a legal process called collective enfranchisement, first established under the Leasehold Reform, Housing and Urban Development Act 1993. They set up a residents’ management company; each participating leaseholder receives shares proportionate to their flat’s value or lease interest. Each owner still holds an individual long lease on their own flat — but as a co-freeholder, they are also on the other side of that lease relationship.

This dual position matters. Building management, insurance decisions, service charge budgets, and major works are controlled collectively by the residents themselves, not by an external landlord whose interests may diverge from those of the occupants. Co-freeholders can also extend their individual leases informally by agreement — often to 999 years at minimal cost — rather than paying the statutory premium that an external freeholder would charge.

For overseas buyers purchasing a London flat remotely, understanding what share of freehold involves is essential due diligence. IREIS Properties regularly helps Taiwanese, Hong Kong, and Singapore-based clients evaluate share of freehold buildings as part of the full purchase process.

Share of Freehold vs Standard Leasehold: The Key Differences

The most important practical differences between share of freehold and standard leasehold relate to lease extension costs, service charge control, and long-term resale dynamics.

Lease extension. In a standard leasehold arrangement, once the remaining term falls below 80 years, the statutory cost of an extension rises substantially. The freeholder can claim “marriage value” — a premium reflecting the uplift in property value that the extension creates. In a share of freehold building, co-freeholders typically extend leases to 999 years by internal agreement at near-zero cost, because they are simultaneously the leaseholders and the freehold owners. There is no external party to negotiate with and no marriage value to pay.

Service charges and management. Standard leaseholders rely on a freeholder or their appointed managing agent to maintain the building and levy service charges. Leaseholders often have limited say over contractors, schedules, or costs. In a share of freehold building, the co-freeholders decide collectively how and when the building is maintained, who carries out works, and how costs are allocated — delivering transparency and control over what can be a significant annual outgoing.

Mortgage and resale perception. A flat with share of freehold is generally viewed more favourably by buyers and their mortgage lenders than one with a standard short-lease arrangement in a traditional freeholder-owned building. Buyers can see that lease extensions are straightforward, service charges are resident-controlled, and no external landlord can introduce unexpected costs.

Standard leasehold strengths. A well-structured standard leasehold — particularly a new-build with a lease of 125 years or more and peppercorn ground rent — carries far fewer of the risks historically associated with leasehold property. London’s most prestigious new developments are typically sold on long leases, and the Leasehold and Freehold Reform Act 2024 has materially improved protections across the board.

For a complete overview of leasehold types, ground rent rules, service charge structures, and EWS1 building safety requirements, see the Leasehold and Freehold Explained guide.

The Leasehold and Freehold Reform Act 2024: What Changed

The Leasehold and Freehold Reform Act 2024 received Royal Assent on 24 May 2024 and is being brought into force in stages. Several provisions directly affect existing and prospective share of freehold owners.

Two-year ownership rule abolished. From 31 January 2025, leaseholders can apply for collective enfranchisement from day one of ownership (GOV.UK enfranchisement guidance). Previously, a two-year qualifying period applied. For buyers joining a building where residents are already planning to acquire the freehold, this removes a waiting period that previously delayed participation.

More buildings now qualify. As of 3 March 2025, the non-residential space limit for enfranchisement and Right to Manage claims has increased from 25% to 50%. Mixed-use buildings with a higher proportion of commercial space can now see leaseholders qualify. For buyers in London’s mixed-use developments — ground-floor retail with residential above — this broadens the potential for collective enfranchisement meaningfully.

990-year lease extensions on the way. The Act provides for statutory lease extensions of 990 years (up from the current 90-year flat extension right). Secondary legislation to commence this provision is expected in 2026 or 2027. For standard leaseholders, this removes the need for repeated extensions over generations; for share of freehold owners, it is largely academic — they can already extend to 999 years informally.

Commonhold reform proposed but not yet law. The government published the Draft Commonhold and Leasehold Reform Bill in January 2026, proposing to ban new leasehold flats in favour of commonhold — where each flat owner holds indefinite freehold of their own unit. This is not yet enacted; implementation is expected no sooner than 2029 if Parliament approves the Bill. For buyers purchasing a London flat today, the applicable framework remains leasehold or share of freehold.

IREIS Properties monitors these reforms and provides clients with updated guidance as legislation takes effect.

Mortgage and Finance for Overseas Buyers

Lenders generally accept share of freehold as mortgage security, though acceptance varies by institution and depends on the specific building’s management structure and lease terms.

Individual lease length still applies. Even in a share of freehold building, the individual flat’s lease must meet lender requirements at the time of purchase — typically 70 to 85 years or more remaining, with requirements varying by lender. Because co-freeholders can extend leases by internal agreement, a short lease in a well-run share of freehold building is more tractable than the same position with an external freeholder — but lenders will want confirmation of an extension before releasing funds.

Management company due diligence. Lenders and their valuers will require sight of the management company’s accounts, confirmation of active Companies House registration, and evidence of how service charges and maintenance budgets are set. A poorly administered management company — with unfiled accounts, arrears, or major works unfunded in the reserve — may cause a lender to decline or impose a reduced loan-to-value.

Overseas buyer requirements. Non-resident buyers typically need a deposit of 25–40% of the purchase price, compared with 5–10% available to UK residents on some products. Currency risk — the exchange rate between the buyer’s home currency and sterling — is a material planning variable. IREIS Properties recommends engaging a specialist FX broker early in the process; a forward contract, where appropriate, allows the conversion to be fixed ahead of completion rather than subject to the spot rate on a given day.

Stamp duty for overseas buyers. Non-UK-resident buyers pay an additional 2% SDLT surcharge on top of the standard rate structure. The total liability depends on the purchase price, whether it is the buyer’s first UK property, and other individual factors. Use the Stamp Duty Calculator to model the figure for your specific circumstances, and confirm the exact position with a solicitor before exchange. For a full breakdown of how the overseas surcharge applies, see the Non-Resident Stamp Duty Guide.

Due Diligence: Six Things to Check Before Buying

Share of freehold properties require specific due diligence beyond a standard leasehold purchase. Your solicitor will cover these, but IREIS Properties advises clients to ask about them early.

1. Who holds the freehold? Confirm the name of the freehold-holding company, verify it is actively registered at Companies House, and check that a share in that company transfers to you as part of the purchase.

2. Individual lease length. Confirm the unexpired term. If it is approaching or below 85 years, seek written confirmation from the co-freeholders of the agreed extension plan and timeline.

3. Service charge accounts. Request the last two to three years of management company accounts. Look for a healthy reserve fund, no large outstanding maintenance items, and consistent service charge trends.

4. Major works and planned expenditure. Ask whether any significant works — roof, external walls, lifts — are anticipated within the next five years, and whether the reserve fund is adequate.

5. EWS1 and building safety. For buildings over 11 metres, confirm the external wall assessment status and whether any cladding or fire safety remediation is outstanding. Unresolved EWS1 issues can make a property unmortgageable. For the full checklist, see the London New-Build Due Diligence Guide.

6. Ground rent and service charge terms. Confirm the ground rent level under your individual lease. Any new lease created from 30 June 2022 must have peppercorn (zero) ground rent; for older leases, the terms depend on the original documentation. For a detailed walkthrough of how service charge budgets work, see the Leasehold Service Charge Guide for Overseas Buyers.