With house prices soaring and showing little sign of slowing down, choosing the right type of property is all important. Here, our Director and Residential Property specialist, Erin Cronin, explains the difference between the two and the important legal distinctions:
In a nutshell, freehold is when you buy the property and the land that it stands on, whereas leasehold means that you own the building or apartment, but you have to pay ground rent or other charges on the land it stands on.
Is freehold a better option?
It certainly offers peace of mind as owning the freehold gives complete ownership. The downside is that it might cost more to buy initially.
Freehold properties are also easier to sell as the closer a lease is to expiry the harder it is to sell. Mortgage rates also increase if the lease is under 70 years.
You can extend the lease on a property, but at a cost. Depending on the remaining time on the lease, extending can cost tens of thousands of pounds. To ease the burden, the Government has laid out proposals to make it easier and cheaper for leaseholders to extend a lease, buy a freehold, and do away with ground rent.
What are the leasehold costs?
While leasehold properties are often cheaper to buy than freehold, there are costs involved, including the annual ground rent, maintenance fees and services in shared buildings, and building insurance.
Are there benefits to leasehold?
It is generally agreed that owning the freehold is less complicated and has fewer restrictions, but there can be benefits to leasehold property, particularly in a shared building. These might include having access to communal facilities such as a gym or resident lounge or covered parking.
Checking leasehold versus freehold
Details of this can be checked at the Land Registry website, where the address can be searched and details can be found on the property title which confirms whether the property is freehold or leasehold. It’s £3 each to buy a copy of either the title register or title plan.
The document will also include:
- Who owns the property
- Details of any ‘restrictive covenants’ – promises to not do certain things with the land, like not building on a particular area
- Details of any ‘easements’ – the rights of one piece of land over another, like a right of way
- In some cases, the title register will not include the details of the restrictive covenants or easements but will say which documents do.
You might be able to find some information in the land and property information service without buying the title register or title plan.
For help and advice on matters relating to residential property and leasehold matters, please get in touch with our team.