Ellie Hooson is a trainee solicitor and considers the crucial difference between freehold and leasehold properties.
Before you fall in love with a property, there’s one crucial question you need to ask: Is it freehold or leasehold?
It might sound technical, but it can have a big impact on your costs, control, and potentially, the future value of your property.
Freehold is Full Ownership, Full Control
When you buy a freehold property, you are buying both the building and the land it stands on.
Benefits of freehold ownership include:
- No landlord: You don’t have to pay ground rent.
- Indefinite ownership: You own the property outright, without a lease.
- Full control: You can renovate or extend the property as you wish (subject to planning permission).
Things to consider:
- Freeholders are responsible for all repair and maintenance costs, as there is no landlord or management company.
- Some freehold properties may be subject to a rent charge, an annual payment similar to ground rent. The property deeds will indicate if this applies. It is important to speak with your solicitor if you’re unsure about any implications regarding this charge.
Leasehold is Ownership for a Fixed Period
With a leasehold property, you purchase the right to occupy and use the property for a long, fixed period, often 999 years, but you do not own the land it stands on. The land remains owned by the freeholder.
Historically, particularly in the North West, many leasehold properties were created by large landowners, such as mill owners, who developed housing for workers while retaining ownership and control of the land.
Key considerations for leasehold properties include:
Time-limited ownership:
Most leases last between 90 and 999 years. When the lease expires, ownership reverts to the freeholder. Extending a lease can be costly, so it is important to seek legal advice if there are fewer than 80 years remaining as this could affect the value of the property.
Ground rent:
You must usually pay an annual fee to the freeholder. Older properties often have a nominal “peppercorn” rent, while newer properties may have higher fees. It is, therefore, important to budget accordingly.
Service charges and maintenance:
You may also need to contribute to the upkeep of any shared or communal areas. Service charge often exceeds ground rent payments. Your solicitor will advise on the amount and frequency of these payments.
Restrictions:
The lease may contain various rules and conditions on your ability to renovate, extend or sublet the property. Your solicitor will advise you on any restrictions in place and it’s important to seek guidance if you have any concerns.
Whether you are buying a freehold or a leasehold property, it is important you fully understand the rights and restrictions affecting the property.
Ellie Hooson is a Trainee Solicitor in our Wills and Probate department. For more information, please contact her on 01706 525053 or email her at ellie.hooson@lancslaw.co.uk
