Share of Freehold: Problems and Red Flags

Share of freehold is often pitched by estate agents as the best of both worlds: you get to own part of the building outright instead of just leasing your flat for a fixed term. That pitch is not wrong, but it glosses over a set of practical problems that only surface once you are living with the arrangement. This guide sets out the eight most common share of freehold problems, the red flags you should check before you buy, and how to resolve disputes if you already own a share and something has gone wrong.

With a share of freehold, you and the other flat owners in the building jointly own the freehold, usually through a limited company where each flat holder is a director and shareholder. You still hold a long lease on your own flat, typically 99 to 999 years, but because you also own a stake in the freehold, you have a direct say in how the building is managed and can extend your lease or vary its terms without needing a landlord's permission.

This differs from standard leasehold conveyancing, where a separate landlord owns the freehold and you simply lease the flat from them, and from full freehold, where one person owns both the building and the land outright with no lease involved. Leaseholders in blocks who want more control sometimes go on to buy their freehold collectively, a process covered in our guide to buying your freehold, which converts their leasehold flats into a share of freehold arrangement.

Share of freehold sounds simple in theory: everyone in the building owns a slice of the freehold, so everyone shares responsibility fairly. In practice, disputes are common because the arrangement relies on flat owners cooperating as company directors, often without any professional training in property management, insurance or company law. Here are the eight problems that come up most often, based on the disputes that reach mediation and the First-tier Tribunal each year.

1. Maintenance and repair disputes

Decisions on roof repairs, external redecoration or lift servicing need agreement from co-freeholders, and disagreements over timing, contractor choice or cost-splitting are the single biggest source of friction. A block of four flats might have one owner pushing for an urgent £18,000 roof repair while another wants to defer it, and without a majority voting mechanism written into the articles of association, the dispute can stall for months.

2. Non-payment of service charges by co-owners

Unlike a landlord-run building, where a professional freeholder can pursue arrears through standard debt recovery, share of freehold owners often have to chase their own neighbours for unpaid service charges. If one flat owner falls behind by £2,000 or more, the shortfall usually has to be covered by the others in the meantime, and recovering it can mean taking a neighbour to the county court.

3. Companies House compliance failures

The freehold is usually held by a limited company, and that company has legal obligations under the Companies Act 2006, including filing confirmation statements and accounts every year. Miss these filings and Companies House can strike the company off the register. When that happens, the freehold does not simply disappear: it passes to the Crown as bona vacantia, and restoring the company or the freehold can cost several thousand pounds in legal fees.

4. Insurance gaps and underinsurance

Buildings insurance for the block is usually arranged collectively, but if nobody takes clear ownership of renewing the policy, cover can lapse or the sum insured can fall behind rebuild costs. An underinsured block of flats that suffers a fire or flood can leave every owner facing a shortfall in the tens of thousands of pounds when it comes to rebuilding.

5. Decision-making deadlocks

Blocks with an even number of flats, such as two or four units, are especially prone to deadlock because votes can split 50/50 with no casting vote available. A two-flat share of freehold where the owners disagree over a £5,000 guttering repair can remain unresolved indefinitely unless the articles of association set out a clear tie-breaking process.

6. Difficulties selling

Selling a share of freehold flat usually requires signatures from every co-owner or director to transfer your share of the company alongside the lease, plus identity verification checks under anti-money laundering rules for each of them. If a co-owner is abroad, uncooperative or simply slow to respond, this can add weeks to the conveyancing process and delay your sale at the worst possible moment.

7. Mortgage lender restrictions

Some mortgage lenders apply extra conditions to share of freehold properties, particularly where the freehold company has more shareholders than flats, non-resident directors, or a commercial unit on the ground floor. A buyer's mortgage offer can be delayed or declined if the lender's conveyancing panel flags the company structure as high risk, so it is worth checking lender criteria early.

8. Lack of professional management expertise

Flat owners who become company directors rarely have training in building surveying, insurance procurement or company administration, yet they are responsible for decisions that a professional managing agent would normally handle. Mistakes such as under-collecting the sinking fund or missing a fire safety recommendation can be costly to fix later, sometimes running to tens of thousands of pounds in backdated levies.

If you are buying a share of freehold flat, the usual searches and enquiries that apply to any leasehold purchase are not enough on their own. You also need to check the health of the freehold company itself, because you are about to become a director and shareholder in it, not just a leaseholder. Ask your conveyancing solicitor to review the following before you exchange contracts.

• Companies House status: Confirm the freehold company is listed as active and not showing an overdue filing or strike-off warning on the Companies House register.
• Articles of association: Check how voting works, what happens in a tie, and whether there is a clear dispute resolution process written into the company's rules.
• Three years of service charge accounts: Ask for recent accounts to spot arrears, unusually large one-off levies or a sinking fund that has been run down to zero.
• Building insurance policy: Check the sum insured is realistic for rebuild costs, and note the excess, since a high excess of £1,000 or more can catch owners out after a claim.
• Lease length and covenants: Confirm the lease has at least 80 years remaining and check for unusual restrictions on subletting, alterations or pets.
• Number of directors and shareholders: A mismatch between the number of flats and the number of company shareholders can signal past disputes or unresolved transfers.

Most share of freehold disputes do not need to end up in court, and escalating too quickly can cost more in legal fees than the issue is worth. Working through a clear escalation ladder, starting with informal contact and only reaching a tribunal or court as a last resort, resolves the vast majority of disagreements between co-freeholders.

Informal negotiation and regular meetings

Many disputes start because there is no regular forum for raising issues. Holding a short meeting every quarter, even informally over email or video call, and keeping brief written minutes gives every owner a chance to flag problems before they escalate and creates a paper trail if things do end up in dispute later.

Mediation

If direct negotiation stalls, an independent mediator can help co-freeholders reach a compromise without the cost of legal proceedings. Property mediation typically costs between £500 and £1,500 split between the parties, and sessions are usually resolved within a single day, making it far cheaper and faster than a tribunal hearing.

First-tier Tribunal (Property Chamber)

For disputes over service charges, management or lease terms, the First-tier Tribunal (Property Chamber) offers a route that is cheaper than court, with an application fee of around £100. The tribunal can rule on the reasonableness of charges and issue directions, though it cannot force the sale of a share or remove a director from the company.

Court action

Court action should be a last resort, reserved for recovering unpaid debts, resolving company law disputes that fall outside the tribunal's jurisdiction, or enforcing a breach of the lease. Legal costs for contested county court proceedings often run into several thousand pounds, so most solicitors will recommend exhausting mediation and tribunal routes first. Understanding the likely conveyancing fees and legal costs at each stage helps you judge whether escalating is worthwhile.

Most share of freehold problems are avoidable if the co-owners set up sensible governance from the day they take on the freehold, rather than waiting until something goes wrong. A small amount of structure early on saves far larger costs and disputes later.

• Set up a sinking fund immediately: Start collecting a modest monthly contribution, even £30 to £50 per flat, so major repairs do not rely on emergency one-off levies.
• Hold annual general meetings with minutes: A formal annual meeting, properly minuted, keeps decisions documented and reduces disputes over what was agreed.
• Use a managing agent for larger blocks: For blocks of six flats or more, appointing a professional management company to handle insurance, accounts and contractor management removes the burden from unpaid volunteer directors.
• Keep Companies House filings current: Diarise the confirmation statement and accounts deadlines well in advance, since missing them risks the company being struck off.
• Review insurance annually: Reassess the buildings sum insured each year against current rebuild costs rather than simply renewing on autopilot.

Organisations such as the Leasehold Advisory Service publish free guidance for share of freehold companies on running annual meetings and managing company obligations, and are worth consulting if your block has no professional managing agent.

Share of freehold still offers real advantages over standard leasehold: you can extend your own lease at minimal cost, you are not exposed to a landlord who might neglect the building or hike charges, and you have a genuine say in how the property is run. For most owners, these benefits outweigh the risks described above, provided the company is properly run.

The problems in this guide are largely avoidable with good governance, adequate insurance and up-to-date Companies House filings. They become serious mainly when a block has no clear decision-making process, no managing agent and no sinking fund. Before you buy into a share of freehold flat, or if you already own one and want to check the company's health, it is worth asking a solicitor to review the articles of association and recent accounts. Find your conveyancer to check the paperwork before you commit.