Freehold or Leasehold?

Freehold and leasehold are two different types of ownership of a residential property. Understanding the differences between them is crucial for anyone looking to invest in a residential property.

A freehold property is one in which the owner has the absolute and unqualified legal right to the property. This means that the owner owns both the land and the building on it outright, and has the right to use, occupy and manage the property as they wish. The ownership of a freehold property is passed on to the heir automatically and there is no time limit on the ownership. Freehold properties are considered to be the most desirable form of ownership as the owner has complete control over the property and can make any changes they wish without the need for permission from anyone else.

On the other hand, a leasehold property is one in which the owner holds a lease or contract to occupy the property for a specific period of time. The lease is usually granted by the freeholder (the person who actually owns the land and building) to the leaseholder (the person who holds the lease) for a fixed period of time, usually between 99 and 999 years. Once the leasehold period is over, the property reverts back to the freeholder. The leaseholder has the right to use and occupy the property during the leasehold period, but does not own the land or building.

One of the main advantages of leasehold properties is that the leaseholder is not responsible for the maintenance and repair of the common areas or the building's exterior. This is the responsibility of the freeholder and is usually included in the service charge. Leasehold properties are often less expensive than freehold properties and can be a good option for first-time buyers or investors looking for a lower cost option.

However, there are also several disadvantages to consider when purchasing a leasehold property. One of the main disadvantages is that the leaseholder has no control over the property and must seek permission from the freeholder for any changes or improvements. Additionally, the leasehold period is limited, and the property will revert back to the freeholder once the leasehold period is over. This means that the property will not be passed on to the leaseholder's heirs. Leasehold properties also usually come with a service charge which can be quite high, and the leaseholder is responsible for paying this charge.

Another issue that you can encounter with a leasehold property that has a lease under 70 years remaining is the restrictions on mortgage lending. This does not mean you can not proceed however you should seek advice regarding the property before doing so.

In conclusion, freehold and leasehold are two different types of ownership of a residential property. A freehold property is the most desirable form of ownership as the owner has complete control over the property and can make any changes they wish without the need for permission from anyone else. On the other hand, a leasehold property is one in which the owner holds a lease or contract to occupy the property for a specific period of time, usually between 99 and 999 years. The leaseholder has the right to use and occupy the property during the leasehold period, but does not own the land or building. It's important to understand the differences between them and consider your own goals and financial situation before making any investment decisions.