The difference between freehold and leasehold property
Freehold
A ‘freeholder’ owns both the property and the land it stands on, for an unlimited time period.
Leasehold
A ‘leaseholder’ owns the property but not the land it is built on. This land is owned by the ‘freeholder’ – which could be the owner of an apartment block, a property developer or an individual.
Despite owning the property itself, the ‘lease’ of the land it stands on can be a number of years or decades up to 999 years. The number of time left on the lease can be crucial to your decision to go through with things, and to ensure the ownership won’t get passed back to the freeholder at any point.
Leasehold Conveyancing Solicitors
When you instruct our experienced team for your leasehold property conveyancing, in addition to the usual checks, you can ensure they will help to clarify:
- The length of the lease (you can find guidance on lease lengths and associated considerations in this article from Zoopla)
- The value of ‘ground rent’ (the fee paid for the lease) to be paid to the freeholder
- Any additional service charges owed, so there are no hidden surprises down the line
- Responsibilities as a leaseholder for any maintenance or building works
Understanding Lease Lengths
The longer the lease, the better, in most cases. Bear in mind that although you will own the property, you will remain a ‘tenant’ of the land on which it is built. As such, you may have to seek permission from the freeholder to make any changes to the property or extensions onto the surrounding land within the plot.
It is generally advised that properties with a remaining lease of 80 years or less, the lease will need to be extended. If not, contributing factors would make mortgage rates increase and you may struggle to re-mortgage or even sell in the future.
Such terms can often be breezed over in the initial stages of the purchase but it is crucial to find out this information to know where you stand. Future saleability of the house may be affected if the lease is not extended. You could, in some circumstances, purchase the freehold, but you would need specialist advice on this specific to the property you own.
On the plus side, reform to leaseholds is due, although there is no exact date of when this will take place. Consequently, a decision on freehold purchase or lease extension may be better waited on for a while, if possible, until new changes become law.