You want to buy a home, but what sort of property should you invest in?
Home-owning jargon can be a headache if you’re new to the game. With gentrification and development happening everywhere, leasehold properties are becoming more common. But what does this mean? What are the benefits to a leasehold property versus a freehold one? Here, we break down the differences between leasehold and freehold and provide an overview of your rights in both.
Freehold and Leasehold: What’s the difference?
- A freehold property is when you own a property and the land it’s built on.
- Owners may renovate the exterior and interior of their property in accordance with local regulations.
- This is a term applicable to most building complexes and apartments. It’s when you own a flat or apartment, for example, within a greater apartment building or housing complex owned by someone else.
- You have the right to lease the property from the freehold owner or landlord for a set period of time.
- The set period of a lease is upwards of 75 years, after which the property will either revert back to the owner of the land. Alternatively, the leaseholder can extend their ownership.
- Lenders will usually not lend to a buyer if they’re taking on a lease of less than 75-80 years. Many residential leases last for up to 125 years, but can go up to 999 years.
Your rights and responsibilities: Freeholder vs Leaseholder
Firstly, you’ll need to establish whether you’ll be buying a flat or a house. If you’re buying a flat, you may be able to buy a share of freehold, meaning you own a portion of the land on that property. In comparison, if you’re buying a house, you purchase the building and the land it sits on. As an owner of a freehold property, you are responsible for all maintenance and upkeep of the building. Luckily though, you won’t have to pay annual ground rent. If you purchase a freehold property, it will be your name listed in the land registry and you’ll own the “title absolute”.
“If you’re buying a leasehold property, it’s more complicated and so you should expect the legal process to take longer than a freehold,” says Beaumont Legal conveyancing expert Heather Little. The complications are a result of more people being involved with a leasehold. While you own the flat or portion of the property that you live in, you’re leasing it from a freeholder or landlord for a set period of time. This ownership scenario means that you’re obligated to follow the contract that you create with the landlord when you purchase the property. Additionally, you’ll have to pay annual ground rent, plus seek permission if you want to do any major works to the property.
Things to be aware of when buying a “Share of Freehold” property:
- The term “Share of freehold”. The freehold will be collectively owned by you and the other occupants of the building, but you’ll still have an individual lease. This sets out the rules of the occupancy and what you’re personally responsible for.
- “When viewing share of freehold flats, it is always a good idea to try and establish who the other freeholders are and how easy it is to deal with them when it comes to arranging repairs and maintenance etc,” says Little. “You’ll have to liaise with them about the general maintenance of the property, so it’s best to ensure you’re dealing with people you can get along with. You might be dealing with an absent freeholder that you can’t get hold of for months when all you want to do is agree and split costs to fix the guttering or repair peeling paint in the entrance hall.”
What to do?
When deciding on a new home, it’s always important to do your research. Speak to friends, chat to a lawyer, have a poke around online. Ultimately, your home is the place where you can put your feet up at the end of a long day. It’s an investment and therefore worth putting a lot of thought into.
Once you have picked a place, we can help you with the paperwork involved with purchasing the property: a good conveyancer can really take the load off what can otherwise be a stressful time.
Need a conveyancer? Beaumont Legal can help you with your home purchase, whether it’s freehold, leasehold, or share of freehold you’re after.Chat to us