What is the difference between freehold and leasehold?
2 Feb, 2017
When property hunting you will probably come across the terms ‘freehold’ and ‘leasehold’. Confused about what they mean? Let us help you out...
What does freehold mean?
If the property is freehold it means you own the building and the land it is situated on for an unlimited amount of time (until you decide to sell it on). The upkeep of the internal and external building, as well as the land, is your responsibility and you must do this at your own cost. However, this means there are no monthly maintenance costs or ground rent to pay and no landlord rules to follow (although always check for old covenants - but these are rare).
What does leasehold mean?
A leasehold property means you do not own the building or land it is situated on but you have been given permission to live in the property for a set amount of time (a lease). The lease is usually around 99 years, though this can be much longer (such as 999 years) or much shorter (such as 30 years). At the end of the lease the property may be transferred back to the owner (freeholder). However, the lease can often be extended at a cost. You are usually not responsible for the external upkeep on the building or land (though this can vary from lease to lease). As a result you will probably be expected to pay ground rent and probably maintenance costs.
Leasehold properties are often flats or apartments where there are several properties in the same building.
When buying a leasehold property you should look at the length of the lease. It should have at least 80 years on the lease and not drop below 70 years during the period you own the property. This can make it more difficult to sell and more expensive if you want to extend the lease.
Owning a share of the freehold as a leaseholder
In the case of some properties you can purchase a leasehold property but own a share of the freehold as well. The other owners of the freehold will probably be your neighbours. This is a desirable situation to be in for leasehold properties and is sought after by buyers.
If you are a leasehold property owner and are interested in purchasing a share of the freehold then you will need to serve a notice on your landlord. This requires that 50% or more of the owners collectively agree on becoming freeholders.
If you are considering buying a leasehold or freehold property and you are still unsure about the differences you may want to speak to a conveyancing solicitor before making any decisions.