Introduction

If you live in a block of flats with a freehold company, you probably also own a share in that company. You may have bought your flat with a share of the freehold, been part of the original freehold purchase group or bought a lease extension with freehold share or simply a freehold share later on.

Whatever the circumstance, owning a share of the freehold has two main benefits:
1) If you own a share in the freehold the threat of a diminishing lease and diminishing value are minimised, as you can more easily get a lease extension.
2) Owning a share in the freehold is a clever way of collectively the leaseholders as shareholders having control over their building.

But what happens when someone wants to sell their flat – and with it, their share in the company? Well that is all good, leaseholders should be required to sell their share of freehold when they sell their lease.

And, what happens, when someone who was not part of the original freehold purchase group wants to buy a share a few years later. This is where company law comes in, and it’s not just about paperwork. There’s a legal obligation to make sure shares are sold for fair value, and getting it wrong can cause disputes, or in theory claims of derogation of duty, or selling undervalue. In this blog, we’ll break down what that means in everyday terms and why it matters to leaseholders.

What does it mean to sell shares in a Freehold ManCo?

When you own a flat in a self-managed block, you often own both your lease and a share in the freehold management company (Freehold ManCo). Selling your flat usually means selling your share in the company at the same time. This is how the new buyer steps into your shoes and becomes part of the group managing the building.

A restriction can be entered on the land registry title to make sure that sales transactions include both leasehold and freehold share transfer.

Fair Value and How It's Decided

Company law says that when shares are issued or sold, they must be sold at a fair value. When a flat is selling, essentially the flat sale price is an all-encompassing price that includes both the lease and freehold share.

But when a leaseholder who does not have a share in the freehold asks to buy a share company law requires the seller (Freehold ManCo) not to give away shares too cheaply, which could be unfair to other members of the company (who should share in the proceeds- perhaps by way of a dividend or capital distribution, or partial loan repayment of the original monies they lent the Freehold ManCo to buy the freehold in the first place.

Company law also makes sure the company isn’t disadvantaged financially. So, usually a valuer (chartered surveyor/registered valuer) is appointed to value how much a new Freehold ManCo share should be sold at. The actual price the valuer determines will be based on the unexpired term of the lease, as in theory the shorter the lease the more valuable the Freehold share will be.

Fair value doesn’t always mean a huge sum of money – in fact, in many resident freehold companies, shares are often sold at a nominal price, for example if the unexpired term (reversion) of the lease is say 980 years of a 999 year lease, as there will in that case be virtually no value – except for democratic control in the Freehold ManCo entity and decision making in running the block. Sometimes, professional valuations are used, but often it’s about consistency and fairness across all members.

What happens if shares are sold for less than fair value?

If shares are transferred for less than fair value, this is mostly likely a breach of company law. This might allow other shareholders to challenge the transfer, or in serious cases, lead to legal action. It can also cause friction between neighbours if people feel the rules haven’t been followed properly. Employing a chartered surveyor/registered valuer to carry out a formal valuation and assess the share sale premium is a good way to avoid this.

Who oversees the process of selling Freehold ManCo shares?

The directors of the freehold company are responsible for making sure everything is done correctly. They need to check that the transfer complies with both the company’s articles of association and with company law. If in doubt, many directors take legal advice to avoid problems later. And, ultimately it is the company secretary who will usually effect the actual stock transfer form or who will issue new share capital.

What should leaseholders know before selling their share?

If you’re selling your flat, you’ll almost always be selling your share in the freehold company too. It’s important to make sure your solicitor understands this and includes it in the sale paperwork. That way, the buyer becomes both a leaseholder and a shareholder, keeping the system balanced for everyone.

Selling a flat in a self-managed freehold block isn’t just about the bricks and mortar – it’s also about the company share that goes with it. Making sure shares are sold for fair value keeps everything above board and avoids disputes between neighbours. For leaseholders, it’s another reminder that running a block isn’t just about buildings – it’s also about getting the legal and financial details right.

Managing a small block of flats isn’t just about collecting service charges and paying the odd invoice—it comes with a mountain of legal responsibilities. From staying compliant with leasehold law and filing at Companies House, to preparing year-end accounts, issuing legally valid service charge demands, and dealing with late payers in a way that holds up in court, the paperwork can quickly become overwhelming.

That’s where ServiceChargeSorted.co.uk comes in.

It’s more than just an online finance tool—it’s a complete legal and administrative solution designed specifically for small blocks. Whether you're a director of a Right to Manage company, a resident-led freehold company, or just a group of leaseholders trying to keep things fair and transparent, ServiceChargeSorted.co.uk ensures you stay legally compliant and financially in control.

And when things go wrong—like service charge arrears—Ringley Law steps in to handle the debt recovery process properly, so you don’t have to get involved in difficult conversations or risk stepping outside the law.

ServiceChargeSorted.co.uk takes the complexity out of block management, leaving you free to focus on living, not lawyering.