Leasehold vs Freehold Property
What The Difference Is And What It Means For You
Buying a freehold property usually means you are purchasing the building and - importantly - also the land beneath it.
Buying a leasehold property usually means that you own the flat or house - but not the land beneath it - for a fixed period (such as 99 years) on terms set out in a lease agreement. You will have rights to occupy and use the property during that time.
Both ways of buying have their advantages and disadvantages. Need help? Call us now on 01202 355697 or email using the contact form at the bottom of this page.
Buying Freehold Property
Buying your property freehold is usually better than buying leasehold because you generally acquire unrestricted (or significantly less restricted) ownership.
Many people may have to buy leasehold property to start with if they are buying a flat in a residential block or if a developer of a house insists on the sale of a leasehold interest.
Leases are usually granted for 99 years or more. As time passes, a leasehold property owner may struggle to sell their property if it has a short lease. This may force them either to extend the lease or to buy the freehold.
You may not be able to buy the freehold as an individual but it may be possible to purchase the freehold interest through collective enfranchisement if at least 50 per cent of the leaseholders participate.
Usually, you would be a shareholder in a company nominated to buy the freehold on behalf of all participating leaseholders living in the block.
So if there are 20 participating flat owners/leaseholders, then you may end up owning a 1/20th share in a company that owns the freehold. Such shareholdings can sometimes differ, depending upon contributions and participating leaseholders.
Buying Residential Leasehold Property
Buying residential leasehold property can seem confusing to start with because it is such a complex area of the law.
It is very easy to confuse residential leasehold property (purchasing a flat with a lease of, for example, 99 years) with short term tenancies of say six months or more.
This is because the law uses the same terms - landlord and tenant - in both instances.
So even if you have purchased a flat by way of a lease that lasts for decades, by law you are still classified as a ‘tenant’ or ‘leaseholder’ - and the ‘freeholder’ will be referred to as the ‘landlord’.
And even though you own your flat, you may still have to pay the freeholder/landlord a ground rent.
You may also have to pay for maintenance at least once a year to cover costs such as cleaning, repairs, gardening and buildings insurance (although each leaseholder should consider their own separate contents insurance).
Your freeholder will usually be responsible for the upkeep of the main structural parts, any communal areas (lifts, stairs, hallways) and the grounds surrounding the block.
These generally expected obligations should always be checked when buying leasehold property.
A freeholder may instruct a managing agent or the leases may require a separate management company to look after maintenance, administration and the collection of ground rent.
Contact Us Now For More Help
Our residential leasehold property solicitors are experts in this specialist field and handle enquiries from all over the country.
Get expert help. Email us now using the form below or contact our Bournemouth office.