Whats the difference between leasehold and freehold property?
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This is a question that’s often asked by those who are new to buying property, along with wondering about the advantages and disadvantages of each kind of ownership. In this guide, we’ll try to answer some of those questions.
A leasehold property is a home that’s owned for a fixed period of time under a legal agreement with a landlord or freeholder, called a lease. An estate agent’s details of a property will show the length of the lease. This tells potential buyers just how many years they’ll own their home for, before the ownership of property returns to the freeholder.
Generally, flats in blocks or ones which form part of a house that has been divided into separate apartments will be leasehold, as will most properties bought on a shared ownership basis. More and more new build houses are starting to be sold on leases too, although older houses will be freehold.
Leases tend to be long term – and can be anything up to 999 years. In some cases, however, they can be as short as 40 years.
The advantages of leasehold properties
Under the terms of your lease, the freeholder may well have a responsibility for the upkeep and repair of certain parts of the property as well as the common areas such as hallways, landings and gardens. Because the property will only be yours for a fixed amount of time, these also tend to be cheaper than freehold properties.
In some circumstances you might also be eligible, either individually or collectively with all the other property owners under the lease, to buy the freehold and own your property outright.
The disadvantages of leasehold properties
As part of your lease agreement, there may be certain restrictions on what is and isn’t allowed. For example, many forbid the keeping of pets in the property and you will probably have to seek the landlord’s permission before carrying out any major alterations such as knocking through walls. In some circumstances, you may also need a landlord’s permission before switching mortgage providers.
There are also likely to be regular additional costs including a nominal amount for annual ground rent, service fees and management charges. You might even be asked to pay into a running fund to pay for building repairs when they are needed.
Lenders are also quite particular when it comes to leasehold. So if there’s less than 70 years’ lease remaining on any property you want to buy, it may be difficult to get a mortgage.
With a freehold property, the owner owns the building and any land around it themselves on a permanent basis.
The owner is solely responsible for the repair and upkeep of the property.
The advantages of freehold properties
The main advantage is that you own the property and land outright so there will be no ground rent or other charges to worry about. You will also be able to alter the property at your will, subject to getting the appropriate planning permission/survey with appeal.Read more about conveyancing
The disadvantages of freehold properties
Because they generally come with some additional land such as a yard or a garden, freehold properties tend to be more expensive than leasehold ones. As the owner you will also be solely responsible for the property’s maintenance and upkeep. But, even taking these facts into account, the advantages of being a freeholder generally outweigh those of being a leaseholder.
We hope that this short article has answered at least some of your questions about the differences between the two kinds of property ownership. For more help, of if you are planning to buy either a leasehold or a freehold property, our conveyancing experts will be happy to advise and help you. For more information about property have a read of our detailed document
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