Freehold Property vs Leasehold Property: What is the difference ?
- HomeHelper
- May 6
- 3 min read
Have you been to a few house viewings and are you unsure whether to go for a Freehold or Leasehold property?
You are not alone - and we're here to help. We have prepared a guide to help you make an informed decision outlining the key differences, potential cost and long term implications.
Why is it important to know the difference?
When you buy a property you are not just buying a home, you are taking on a set of rights and obligations that vary depending on whether the property is freehold or leasehold.
These obligations can become onerous or expensive in the long run. For example, certain leasehold properties require you to pay ground rent or service charge which can increase over time.
What are the key differences?
A freehold property is owned solely by you, this means you own the property and the land which the property occupies.
In contrast, with a leasehold property, you own the property however it is only for a fixed term and the Landlord/Freeholder still retains the land which the property occupies and the common areas of the property.
Freehold Property
You own both the property and the land it sits on.
You will be responsible for the upkeep of the house and the land that it occupies.
No ground rent and service charges are typically due.
You can generally alter or extend the property (subject to local planning rules) without needing third party consent.
Most houses fall into this category.
Leasehold Property
You will own the property for a specified period, (typically 99, 125 or even 999 years).
As the lease term shortens-you will need to extend your lease- otherwise the ownership reverts to the freeholder when it expires.
The freeholder retains ownership of the land and the common areas.
You are responsible for the interior of the property; the landlord handles external and shared areas maintenance of which is funded through service charge.
You may also have to pay ground rent.
Alterations to the property generally require the landlord's consent.
Most flats fall into this category.
Why does it all matter?
Financial implications:
Leasehold properties often come with additional costs, such as service charge, ground rent and fees from the landlord when you sell the property.
Amenities at your property, such as a gym or concierge service will be included in your service charge- these costs vary by location, size and facilities.
Property Value:
The length of your lease will have an affect on the property value - the longer the lease, the higher the property value. You will not have this concern with freehold properties.
Lease Extension Costs:
When a lease nears the end, extending it can be expensive. You'll typically need to pay a premium, the landlord's legal fees and your own.
A short lease can make it harder to secure a mortgage or sell the property.
Alterations:
If you wish to alter the property, unlike freehold properties, you'll need your landlord's consent for any structural changes.
Always review the lease terms and consult your conveyancer about your renovation plans, prior to exchanging contracts.
Key differences at a glance
| Freehold | Leasehold |
Ownership | You will own the property and land indefinitely. | You own the property but the land and common areas are owned by the landlord. You only own the property for a fixed period of time. (You will need to obtain a lease extension as your lease nears the end of its term.) |
Ground rent/ Service Charge | Usually none. | Yes- this can be costly depending on the Landlord/managing agents and amenities at the property. |
Responsibility for repairs | Yes- you are responsible for the repairs to the entire property. | In most cases you will be responsible for repairing the inside of the flat. The landlord will be responsible for the external repairs and repairs/upkeep of the shared spaces.
|
Permission needed to alter | Rarely. | Yes, in most cases you will need the Landlord/Managing agents permission to make any structural changes. |
Conclusion
As we have set out above both freehold and leasehold properties have their pros and cons.
What you choose will be dependent on your long term plans, your current budget and the type of property that you are looking for.
Regardless of which property type you end up purchasing it is important that you speak to your conveyancer about any future plans which you have for the property, so they may advise you further.
If you require some further information surrounding leasehold properties, check out the following sites:
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