Understanding the difference between freehold and leasehold: A comprehensive guide

In the world of property ownership, the terms ‘freehold’ and ‘leasehold’ represent the two primary forms of home ownership in the UK.

Understanding the nuances of these ownership types is vital when you are venturing into the property market, be it as a first-time buyer or an experienced property investor.

What is freehold ownership?

Freehold is arguably the simpler and more straightforward of the two forms of ownership.

When you buy a property on a freehold basis, you have:

What is leasehold ownership?

Contrastingly, leasehold is a more complex form of ownership, meaning that you have:

Freehold vs leasehold: Comparing the differences

One of the key differences between freehold and leasehold is to do with the ownership.

The ownership can be split into two sections – the duration and the scope. With freehold properties, you own both the property and land perpetually.

However, with leasehold properties, you only own the property (not the land on which it stands), which is only for a fixed term before you have to extend it for a fee. Here, after owning the property for over two years, you can request to increase the lease by up to 50 years.

Further differences between them are the maintenance of the land and property. For freehold property, it is the sole responsibility of the owner to keep up with maintenance. With leasehold though, management is often coordinated by the freeholder or a management company.

A final key difference between freehold and leasehold properties is the cost implications. Freehold costs are usually lower, as there is no ground rent or service charge. With leasehold properties though, there is the potential for there to be ground rent and service charges to be paid, which often increase over time.

Key things to think about

Understanding the difference between freehold and leasehold is crucial in making an informed decision when purchasing a property in the UK.

While freehold offers a more straightforward and unrestricted ownership, a leasehold can sometimes come with numerous conditions and potential pitfalls, including escalating ground rents and service charges.

If you are considering buying a leasehold property, it is advisable to scrutinise the length of the lease remaining, as it can significantly impact the property’s value and its mortgage ability.

Alternatively, if you are looking at a freehold property, understanding your full rights and responsibilities as the outright owner of the land and property is essential.

If you are considering buying a freehold or leasehold property and would like legal advice, please contact us today.

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