Freehold and Leasehold - what's the difference?

There are a number of crucial differences between freehold and leasehold terminology so it is important to be aware of how the distinction will affect you before considering buying a property of either type.

 

A freeholder has outright ownership of a property and the land on which it stands; it is usually a house, bungalow or similar.

Being a freeholder comes with many legal responsibilities that it is important to be aware of, as non-compliance can result in the tenant taking legal action against you. As a freeholder, you are responsible for maintenence of the property and its land though you don't have to pay ground rent or service charges and you don't have to worry about the lease running out. 

A leaseholder owns the lease for the property but not the land on which it stands; it is usually a flat or an apartment.

Therefore, this makes the landlord a freeholder and the tenant a leaseholder. The leaseholder will have entered into a legal agreement with the freeholder, called a lease, which will expire after a set period of years (typically 99, 125, 500 or 999 years).

As a leaseholder it is important to abide by the terms of your lease. You have to pay annual ground rent, service charges, maintenance fees and your share of the insurance on the property. You should also make sure you are aware of the lease term of your property; if it is fewer than 80 years then you may find it difficult to obtain a mortgage. The lease term can be extended, but this can be expensive.

A short lease term can also negatively impact the value of the property, even if the property prices in your area are rising. Also if you want to carry out any major works on the property then you will have to obtain permission from the freeholder. 

Commonhold is a variant of freehold, where a building of multiple occupancy is divided into freehold units. This means each flat owns their own freehold. The communal parts such as hallways are managed by a commonhold association, a company owned by the freeholders in the building.

 

 

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