Freehold Vs Leasehold

Freehold and Leasehold – What is the difference and why is it an important consideration when purchasing a property?

Most people have heard references to properties either being freehold or leasehold but many people are unsure of what exactly these terms mean and what practical difference it makes, if any, when purchasing a property.

If you purchase a freehold property you will own the property as well as the land on which it is built. You will be responsible for maintaining the property and, subject to planning laws and Building Regulations, you will be able to make modifications to the property (such as extensions, the addition of a conservatory, changing the decor, etc). If your property is listed you will be very limited to the external changes you can make. If the property you are purchasing is a freehold property you will be entitled to live in the property for as long as you wish – you will only be required to move if and when you choose to do so.

Alternatively, the property you are wishing to purchase maybe a leasehold property. This means that you are effectively purchasing the right to own and live in the property for a fixed amount of time – i.e. for however long the lease has left to run. You will not, however, own the land on which the property is built. Leases usually run for 99 years or more – after which time the ownership will return to the freeholder. It may be possible for you to extend the length of the lease with the freeholder if you wish to do so. If you purchase a leasehold property you will be required to pay ground rent to the freeholder(usually a small amount). The lease will state who is responsible for maintenance and repairs of different parts of the property. For example, flats are usually sold as leasehold properties so that there are means of enforcing mutual obligations to repair amongst the leaseholders.

Your solicitor will advise you whether the property you are interested in purchasing is a freehold or a leasehold property and will check that, if the property is a leasehold property, the seller is up to date with their ground rate payments and that there are enough years left to satisfy a mortgagee lender. Mortgage companies favour as long a lease as possible so it is important to go through these details with your solicitor.

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