Property Law : Freehold v Leasehold

When you are buying a house, you will be told whether the land is Freehold or Leasehold - but what is the difference?

Freehold ownership of land is permanent ownership which can be legally passed to your heirs. You also own the Buildings on the Land and are responsible for them entirely.

Leasehold Ownership is a temporary right to land or property. The Freeholder grants a Lease of the Land. This can be for a very long time, more than a lifetime, but there is always a “Term of years” and at the end of the Term the property must be handed back to the Freeholder.

Leasehold Ownership is usually found when purchasing Flats where you purchase the use of the Flat for a number of years on the agreed terms set out on the Lease. This means the value of Leasehold Property can be affected by the amount of years remaining on the Lease - the shorter the term, the less value.

Many Leases for Flats are for 125 years or 999 years and therefore this should not affect you in your lifetime, however if you buy a flat with less than 70 years to run on the lease, you may have trouble finding someone willing to take such a short Lease when you come to sell, and the value will decline as the years pass by.

It is also difficult to obtain mortgage finance on Leasehold properties with Less than 70 years left to run, however in some cases an extension can be obtained.

This does not mean Leasehold Properties should be avoided. They allow the Freeholder to retain control over the common areas i.e. the entrance hall and staircase, as well as the exterior walls and roof. In return you will be charged a service charge, a share of the buildings insurance and management charges and in some cases a Ground Rent. You should ensure you know these costs when considering the purchase of a Leasehold Property.

if you have any residential or commercial property questions, please contact one of our team.

Published 18 October 2019

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