Freehold or Leasehold?

Confused between freehold and leasehold options? We give a brief run down on the differences and what this means to you as a buyer.

Freehold or Leasehold?

Broadly speaking, properties in England and Wales are either freehold or leasehold.  Flying freeholds and commonholds confuse the issue a little, and Scotland has its own ‘feuhold’. However, it is important to understand what you are buying, and the implications of the different types of ownership.

Freehold property

If you buy a freehold, the building plus the land on which it is built are yours to do with as you wish (subject to planning law etc). Freeholds are more straightforward and confer greater ownership, so it is not surprising that they are more desirable and expensive.

Flying freehold

Flying freeholds are a bit more complicated.  For example, if part of your home extends, because of the way the properties were divided, over land owned by your neighbour, this could result in a flying freehold.  Take legal advice from your conveyancing solicitor.

Leasehold property

Here you are buying, not the property itself, but the right to live in it for a specified period (stated in the lease) as long as 999 years.  You may sell the remaining period of the lease when you move.  Naturally, the length of lease will affect its value, and anything with a lease of less than about 60 years could make it difficult to find a mortgage.  See our First Time Buyers section for further advice on leasehold properties.




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Annual charges

With a leasehold property you will be liable to pay an annual fee (usually nominal) known as ground rent, to the freeholder.  Far more substantial is the maintenance or service charge. This covers certain building and decorating costs like the outside of the building, and communal parts in the case of flats.  Enquire about these: it can be galling to move into a basement flat and find that you have to pay tens of thousands of pounds you hadn’t budgeted on for your share of a new roof over the flat above.  Beware also that maintenance charges can rise annually without limit.  However, if there is a disaster with the external fabric of the building, your freeholder will be the one to organize and rectify any problem.

The lease

Leases vary.  Read yours carefully and take legal advice: you need to be aware of your rights and entitlements as they might restrict you from subletting,  having pets, the noise you can make or undertaking certain alterations.  Failure to comply could not only end up costing you a lot of money, you may even find that you lose the property.

Extending the lease or buying the freehold

As a leaseholder you have the right to extend the lease for 90 years or even to buy the freehold if certain criteria are met, though the process is expensive and time consuming. Since the introduction of the ‘right to manage’, leaseholders may be entitled to manage the building as if they were the freeholder even if they do not own the freehold.  Contact the Leasehold Enfranchisement Advisory Service for more information. 

Commonhold

This is a new system of joint ownership where, typically in blocks of flats, each of the owners of the flats is a member of an association which owns the freehold and is responsible for maintaining the common parts.

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  • tannia innes says...

    posted on 23/08/2012 17:39:44

    i have applied to buy my house in right to buy scheme it is freehold but they are telling me i have to pay a service charge yearly to maintain gulys and grass by the flats nothing to do withthe house ,and they said it can go up anytime if road or paths need to be repaired i thought this should be covered by council tax,also none of the other home owners are paying this including my neigbour,when i questioned it with bromford they said we have to pay it and cannot disgus what anyone else is paying ..

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