Leasehold vs Freehold

Freehold - Someone who owns the freehold of a property owns the property and the land it stands on, for an unlimited period.

Most houses are sold as freehold properties as it’s a more clear-cut scenario, given there’s only one property on that piece of land.

Leasehold - Unlike a freeholder, as a leaseholder you own the property but NOT the land on which it is built – This is owned by the freeholder. Ownership of the property is also for a set period, which can be a number of years, decades or centuries, depending on the length of your lease.

Most apartments are sold as leasehold properties with the freehold held by the builder or a company, he or she has sold the freehold to. However, this isn’t always the case. Some apartments – especially in houses converted into many flats – are sold on the basis that the owner shares the freehold with others in the same building, known as ‘share of freehold’.

What else is different about a leasehold property?

You will pay fees (e.g. ground rent) to the freeholder – Always make sure you are clear about how much this will be and by how much it may rise in the future.

A lease will also tend to include certain restrictions; for example, you may not be allowed pets and you may need to ask permission to make changes to the property. If you break any conditions you could be taken to court and may risk losing your lease.

The freeholder is usually responsible for buildings insurance (though not the contents insurance). The freeholder should consult with the leaseholders on certain maintenance costs and some charges, which you can challenge if you disagree with them.

How important is the lease?

If the property has a lease of less than 70 years, you might struggle to get a mortgage. Lenders will normally need it to run for 25-30 years beyond the end of your mortgage.

Extending the lease

Once you’ve owned your home for two years, you have the right to extend your lease by 90 years, providing you are a qualifying tenant. You will usually be a ‘qualifying tenant’ if your original lease was more than 21 years. The freeholder will charge for extending the lease with the cost dependant on the property.