To the average person, the terms ‘freehold’ and ‘leasehold’ may appear to be a bit of a mystery if you’ve never come across them before.
But, if you’re buying a property, it’s important that you know what they mean.
If you’re a ‘freeholder’ of a property, it means that you own it outright – and importantly - that also means that the land it’s built on is included; ‘in perpetuity’.
If you buy a freehold, it will be in your name in the land registry, and as owning the ‘title absolute’.
Detached and semi-detached houses tend to be freehold properties, but there are some houses which may be leasehold – for example, because they were available for sale through a shared-ownership housing scheme.
This means that you own the property, but not the land it sits on. For that, you will have a contract with the freeholder where the number of years you can use the home is stipulated. It will also include details on legal rights and responsibilities of both parties.
Leaseholder: This party normally pays an annual ground rent charge to the freeholder and can be subject to certain conditions such as not sub-letting and not keeping pets, for example.
If you wanted to make any major changes or adaptations to your property, you would have to obtain proper permissions from the freeholder first.
You would also need to pay annual service charges for any communal area/building maintenance costs (sometimes the maintenance is carried out by a managing agent), annual service charges and possibly a share of the overall building’s insurance.
Freeholder: Normally responsible for keeping and maintaining any communal parts of the building, such as hallways, communal garden, ceilings and roofs.
Usually, lease lengths are quite long-term, often ranging between 90 to hundreds of years! They can also be far shorter than this, for example 40 or 50 years.
Technically, when the lease ends, ownership returns to the freeholder – that is unless you can arrange an extension for the lease.
Most flats and maisonettes are owned leasehold (apart from in Scotland, where leaseholds are less common).
If you want to go ahead an buy a leasehold property, bear in mind that you’ll be taking over the lease from the soon-to-be previous owner. Because of this, make sure you check the following information before you make your offer: