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Leasehold or Freehold: Difference Explained

19th May 2023

Leasehold vs Freehold

When choosing your home in the UK, the majority of buyers have two primary possibilities: Leasehold or Freehold. You will be the land and property’s owner with freehold, but you won’t own the land it is built on with a leasehold, instead, you own the property for a set period of time.

Before you proceed with a home purchase, it’s crucial to understand the differences between the two as they have quite distinct expenses and obligations.

What is a Freehold?

When you own a home on a freehold basis, you also own the ground that the building is built on. You are in charge of maintaining the entire property, including the building’s exterior walls and roof as well as everything within.

So long as you get all required planning clearance from the local council, you are free to make any structural improvements to the house, such as adding an extension, conservatory etc.

Can I purchase the Freehold?

If you are a leaseholder, you might want to consider purchasing the property’s freehold. In the case of a flat, for instance, you could be able to purchase a portion of the freehold, which you would jointly own with the other flat owners. You might be able to purchase the entire freehold if the property is a dwelling.

It is highly recommended to get professional legal counsel because this can be a drawn-out and expensive process.

What is a flying Freehold?

A flying freehold is a property that is established over land but is not a part of it. For instance, if one freehold property overlaps another. Flying freeholds are common in the following scenarios:

  • houses constructed on steep hills
  • basements vaults
  • rooms built across hallways
  • archways

Before applying for a mortgage, it is critical to determine if an asset has a flying freehold. Some lenders will not lend on this kind of property, while others may have limitations.

What is a Leasehold?

Leasehold is not the same as freehold.  A leasehold is when, for a set period of time, you practically lease ownership of a property. This usually occurs over a long period of time, but it might range from 40 to 999 years. However, as a rule of thumb, this is usually 90 or 120 years.

You are going to receive a contract with the freeholder of your land that specifies your responsibilities. You will be expected to pay some annual expenditures, which include ground rent, as well as make contributions to repairs and maintenance charges for the communal aspects of the building, for example, the car parking, the roof, lifts, and entrances.

Within broad terms, you must obtain permission from the freeholder to do any major maintenance on the land, and there may be restrictions on things like keeping pets.

If the lease expires, the freeholder will regain full ownership of the property.

Leasehold is typically associated with flats and apartments, however, this was not always the case. Many older buildings in England, Wales, and Northern Ireland are leasehold, while several kinds of new-build residences have been marketed in this manner in recent years. The UK government outlawed this practice in 2019, requiring that all new-build properties be sold as freehold.

Leasehold or Freehold? The Benefits of Purchasing a Freehold Property

Full ownership: If you keep up with your mortgage payments and/or pay off your mortgage, you will have total ownership of the property and land.

There are no charges: You will not be required to pay ground rent, service charges, or administrative costs to the landlord.

Flexibility: You can do whatever you want with your property, such as having pets or making home improvements, as long as you follow the rules of the local government or council.

No Lease: You don’t have to keep track of when your lease expires or pay to renew it, which can be costly.

Leasehold or Freehold? The Benefits of Purchasing a Leasehold Property

Affordable properties: Leasehold homes are typically less expensive than freehold properties. This is owing to the risks involved, though.

Less accountability: The freeholder is normally in charge of building and shared space upkeep as well as insurance for the building, so the onus will lie on them.

Seraph are experts in managing leasehold properties as well as freeholds, if you are looking for a managing agent to help look after your investment please contact a member of our experienced block management team.