Many people assume that when you buy a property you’re purchasing all the building and land as a package. However, the distinction between a freehold property and a leasehold property means that this is not always the case. There is a lot of confusion for buyers over what leasehold and freehold properties entail: almost half of homebuyers surveyed by The National Association of Estate Agents were not aware of the fees and charges that can arise with leasehold property. As a result, 94% regretted making a leasehold purchase. With leasehold property making up around 18% of housing stock in the UK, many of these being apartments, it’s important to be aware of the distinctions between the two.

The basic differences between freehold and leasehold

  1. If you buy a freehold property then you become the freeholder and you own the building and the land it stands on outright, in perpetuity.
  2. Buying a leasehold property means you have a temporary right to occupy the property that you buy. This is defined by the term of the lease, which is usually anywhere from 40 to 999 years. Leaseholders often face restrictions on what they can do with the property (e.g. on having a pet) and may have to pay a range of fees and changes to the freeholder. Leasehold properties are most common in blocks of flats where the freeholder wants to maintain some kind of standard for all the occupants. However, a number of houses may be leasehold too.

The advantages and disadvantages of freehold vs. leasehold

Although being a freeholder means that you are the person responsible for maintaining the fabric of the building, such as the walls and roof, it’s usually the preferable option. Leaseholders often end up feeling like short term tenants, even though they have paid to purchase a property. This is because the lease may have conditions that require the landlord’s consent, such as for repairs or renovations. There are a number of other disadvantages to leasehold properties including:

  • Ground rent. The National Association of Estate Agents study found that, on average, leaseholders paid around £277 per year in ground rent when they moved into a property and are now paying £319 a year.
  • Additional fees. There are a number of situations in which additional fees may become payable to the freeholder. For example, when carrying out alterations or even when selling the property – these may require notice, consent and the payment of fees as well as the use of certain materials or contractors that may be more expensive.
  • Service charge. Although the freeholder may have responsibility for looking after a communal gardens and areas, as well as the fabric of the building itself, they will usually seek to recover the costs to do this by collecting an annual service charge from the leaseholder(s).

Before you buy a property it’s important to understand the implications of the freehold vs. leasehold distinction, both financially and in terms of how you can live in your home. Mewies Solicitors can provide you with appropriate advice and support.

For a no obligation conveyancing quote please call  01756 799000.