What Is The Difference Between Freehold And Leasehold?
When purchasing a property, it is of importance that you know if you are buying a freehold property or a leasehold property, as they are rather different types of ownership.
Freehold
If you own the freehold of the property, you own the property and the land it stands on for an unlimited period. Freehold properties are generally the most common way to buy a house in the UK.
With a freehold, there are no leases to consider and there is no ground rent payable. However, this may not be the case with new build properties wherein there is often an estate charge. If you own a freehold property, you are responsible for the maintenance and upkeep of the building.
Leasehold
If you own the leasehold of the property, whilst you own the property you do not own the land on which it is built and this is owned by a freeholder. You own the lease, which allows you to occupy the property for a set period which can be years, decades or even centuries depending on the length of the lease. If the lease expires, then the ownership of the property automatically passes to the freeholder.
Leasehold properties are commonly found where they are in shared ownership (with the local authority for instance), flats and certain city areas. Many people own a leasehold property however this kind of home ownership can be rather complex so it is important that you understand the terms of the lease. With this said, the ownership of a leasehold property can often be a lower cost to purchase.
A good length of a lease would be around 100 years or more, especially where a mortgage lender is involved. If a lease is lower than this, especially lower than 80 years, then it can be difficult to sell or remortgage the property – so it must be taken into account. In these instances, it may be possible to extended the lease, however this is often complicated and can be costly.
Leasehold properties also have a ground rent and sometimes a service charge amount that needs to be paid to the freeholder or management company, this needs to be kept in mind especially if you have mortgage payments that are payable each month.
If you own a leasehold property and another party owns the freehold, it may sometimes be possible to buy the freehold. However, this is not always the case so you should be aware of this. You can ask to buy the freehold from the landlord but they are under no obligation to sell.
To Conclude..
As you can see, it always very important to take note as to the tenure of the property and ensure you thoroughly read any and all documentation provided to you by the estate agent and your solicitor. If you do have any further questions regarding the tenure of the property you are purchasing, it is important that you raise these with your solicitor prior to completion.
If you would like any further information regarding purchasing or selling a property, or would like to request a quotation, please do not hesitate to contact our friendly team on freephone 0800 011 6666.
April 2024