
Purchasing the freehold of your building is a significant step for flat owners, providing greater control over the property and its management. However, even after acquiring the freehold, it’s common practice for the participating flat owners to grant themselves 999-year leases. But why is this necessary if you already own a share of freehold?
In this article we explore the key reasons behind this practice and why it’s beneficial for flat owners who may believe that no further steps are required after the (sometimes long!) process of
How Do Flat Owners Acquire a Share of Freehold?
There are a few common ways flat owners can come to own the freehold of their building:
When a freeholder decides to sell the freehold, flat owners may have the legal right to purchase it collectively under the Right of First Refusal.
Under the Leasehold Reform, Housing, and Urban Development Act 1993, flat owners can band together to force the sale of the freehold, a process known as collective enfranchisement.
Once the freehold transfer is complete, the freehold ownership is typically managed by a company formed by the participating flat owners, with each owning an equal share.
It is then common for the share of freehold (company share) to be transferred to the purchase of your flat when you sell. The company articles should ensure this is a legal requirement to prevent the situation whereby former flat owners are still involved with the residents management company.

Why Grant 999-Year lease?
After purchasing the freehold, flat owners often grant themselves 999-year leases. This might seem unnecessary since they already own a share of freehold, but there are several compelling reasons for this:
1. Creating a Marketable Title
A 999-year lease is considered "as good as freehold" in the property market.
More Attractive to Buyers: A flat with a long lease, such as 999 years, is far more marketable than one with a short lease, such as 85 years. Short leases often deter buyers and mortgage lenders due to the additional costs and complexities of lease extensions, which will need to be dealt with by someone at some point. We often see last minute requests to extend a lease for this very reason, because a buyer will simply not proceed without it.
Avoid Lease Extension Costs: By granting a 999-year lease at the time of freehold acquisition, flat owners eliminate the need for future lease extensions, saving time and money due to the economies of dealing with this as a group rather than instructing a solicitor on a one-off basis at a later date.
2. Preserving the Freehold-Leasehold Structure
Retaining the existing freehold-leasehold structure is crucial for the smooth management of the building. To remove the leases would mean having no rules over how a flat is used and who contributes to what repair costs.
Responsibilities and Service Charges: Existing leases typically outline key responsibilities, such as maintaining common areas, repair obligations, who insures the building and how service charges are calculated and shared among flat owners. A lease structure ensures these responsibilities are clear and enforceable.
Collective Rights and Obligations: Leases also protect the interests of flat owners. For example, if a neighbour creates a nuisance (letting the flat on AirBnB for example), the lease often provides a legal remedy to address the issue.
Without a lease structure, these responsibilities and rights might become unclear, leading to disputes or complications in property management. It is also not possible to have freehold flats without creating a flying freehold situation, which is something many mortgage companies will not offer mortgages in relation to.
3. Opportunity to Modernise Lease Terms
Granting new 999-year leases provides an excellent opportunity to review and update the existing leases:
Correct Defects: Older leases may contain errors or outdated clauses.
Update Terms: Modernising leases ensures they reflect current legal standards and best practices.
Consistency: A unified approach to leases across all flats promotes fairness and clarity.
What Are the Benefits of a Share of Freehold Lease Extension
Stability: A 999-year lease gives flat owners long-term security and avoids the complications associated with short leases.
Flexibility: While you own a share of the freehold, the lease ensures clear boundaries of ownership, rights, and responsibilities.
Legal Protection: The lease serves as a binding document that protects the interests of all parties and facilitates smooth management of the building.
Costs savings: your solicitor will be able to offer a discount for handling your share of freehold lease extension along with other flat owners, whereas you will be paying a higher, one off fee if proceeding alone at a later date.
Avoid potential tax issues - delaying the lease extension can lead to an unintended capital gains tax issue for the residents management company.
Practical Steps After Acquiring a Share of Freehold
If you and your fellow flat owners recently purchased the freehold, here’s what to consider:
Grant 999-Year Leases
Work with a solicitor to draft and issue new 999-year leases to each participating owner without letting the issue drift.
Review Existing Leases
Use this opportunity to address any defects, inconsistencies, or outdated clauses in the existing leases., perhaps update your lease plan if the layout of your flat has change.
Maintain Proper Management
Establish clear procedures for property management, including service charge collection, maintenance responsibilities, and dispute resolution. This is also a good time to introduce new up to date regulations on holiday lets, pets and other common leasehold issues that may not be adequately covered in old leases.
Conclusion
Even after purchasing the freehold and gaining a share of freehold, granting 999-year leases is a critical step to protect your property’s marketability, ensure clear management structures, and provide legal protections for all flat owners. This approach combines the benefits of long-term leasehold ownership with the advantages of freehold control, creating a secure and well-managed living environment.
If you need assistance with your share of freehold lease extension or drafting 999-year leases, consult a specialist solicitor to ensure the process is smooth, compliant, and beneficial for all parties involved. Avoid missing the opportunity to update the leases by going with the lowest cost quote, which may be for a minimal extension of the lease and reduction of the rent to a peppercorn, without taking the chance to tidy up other issues.