Freehold v Leasehold
The basic differences between freehold and leasehold
- 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.
- 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 is also additional fees with leasehold properties which may be annual such as ground rent or service charges or sporadic such as notice fees for permissions to do certain things such as house alterations.