When you buy a property, it will generally be either on a freehold or leasehold basis. It’s important to learn the differences, so you know exactly what kind of ownership you’ll have when you buy your home.
The following will help you understand what freehold and leasehold mean.
Freehold and leasehold are essentially types of property ownership. The kind you choose will determine whether you pay ground rent, what kind of changes you can make to the property and for how long you’ll own it.
What does Freehold mean?
A freehold is the permanent and absolute tenure of land or property. Basically, if you buy a freehold property, it means you own that property and the land on which it stands outright, in perpetuity. It’s completely yours unless you decide to sell it.
Every property will have a freehold, you just might not own it. If you don’t own your freehold, then you’ll have a landlord who does – they’re called the freeholder. The freeholder can be an individual or a company, like a housing association.
As a rule of thumb, houses are typically available as freehold properties while most flats are available as leasehold. However, leasehold houses and freehold flats do exist – we talk about these more below.
It’s worth noting that there are slightly different rules and processes for buying the freehold on flats from houses. See below for more information.
What does Leasehold mean?
A leasehold is the holding of a property by lease. Leasehold ownership is different from renting as you do, technically, own your property, but you only own it for the length of your lease agreement with your freeholder. Unlike a freehold, you don’t own the land on which your property stands. Instead, someone else will own the freehold – the actual land and the building itself – and you pay for the right to live in the property for a selected period, i.e. until the lease ends.
Your lease agreement will determine what you do and don’t own, and what you can and can’t do to the property, e.g. put up a satellite TV dish or move an internal wall. The ownership of the property returns to the landlord when your lease ends.
The majority of flats you can buy are leasehold, but there are some leasehold houses as well.
Within local regulations you can do what you like to a freehold property. If you want to change things about a leasehold, you need to get the freeholder’s permission within the terms of the lease.
What are the differences between Freehold and leasehold?
When considering the freehold vs leasehold dilemma, it’s a good idea to look at the benefits and drawbacks of each.
Benefits of Freehold
You don’t have to worry about your lease running out – you own the property
You can redecorate/renovate/improve your property as you see fit, without necessarily asking permission
You don’t have to deal with a landlord/freeholder
Drawbacks of Freehold
It’s your responsibility to maintain the property, its exterior, its facilities and any garden area.
Benefits of Leasehold
You usually have less responsibility when it comes to repairs to the property itself – it’s up to the landlord
They’re ideal for people requiring short-term accommodation
There’s normally the opportunity to buy the property outright – you have the right to buy the freehold on a house if you meet certain qualifying criteria, or you can buy a share of the freehold on flats via collective enfranchisement.
Drawbacks of Leasehold
– You’ll have to approach the landlord for a renewal when your lease expires, which isn’t guaranteed
– You have to pay ground rent
– You might have to pay significant service charges – e.g. for the cleaning of communal areas, upkeep of any garden, general maintenance and building insurance
It’s not always as straight-forward as freehold vs leasehold; what suits you ultimately depends on your unique situation.
Thank You, Stephen
Our advisers can explain your options to you in a lot more detail. Call us now on (01) 707 9880
This blog post is intended to provide a general appreciation of the topic and it is not intended as advice.
