The fundamental difference between freehold and leasehold is that with a freehold property, you have outright ownership of the property and the land on which it stands. Whole houses are usually sold freehold whereas flats are often leasehold. Leasehold is a bit more complicated. If you own a leasehold property, you have a lease to live there for a certain number of years (anywhere up to 999 years) but someone else (commonly referred to as the ‘landlord’) owns the freehold.
Typically, freehold is always preferred as there is very little downside. As the freeholder, you have sole responsibility for maintaining the fabric of the building (walls and roof). You also have the freedom of not having to gain permission from the freeholder (often referred to as the ‘landlord’) if you want to make alterations to the property (such as adding a conservatory or extension). You also have the added bonus of not having to pay service charges and/or annual ground rent or to the freeholder.
With a leasehold property, you will pay an annual ground rent to the freeholder, you will normally have to get permission to undertake any major works or alterations to the property. Depending on the terms of the lease, there may also be other restrictions such as no pets or subletting. Failure to fulfil terms of the lease could lead to it becoming forfeit.
There is more to consider when buying a leasehold property. First and foremost, it’s important to check the length of the lease as anything less than 80 years can significantly affect the value of your property.
If it’s a long lease the value of your property will be stable, but as the lease gets shorter, the leasehold property will reduce in value. The reduction will be minor at first but as the lease gets shorter the value will decrease at a greater rate.
Whilst whole houses are normally sold freehold, in recent years there has been an accelerating trend of leasehold houses (particularly new builds) with an estimated four million homeowners in England not owning the freehold rights to their property.
With leasehold new-builds it’s particularly important to check the terms of the lease for onerous ground rent clauses. There have been numerous controversial cases of escalating ground rent, where ground rent charges would double every decade eventually causing the amount to spiral to absurd levels, leaving the buyer with an unsellable property.
There have also been instances where buyers are told they have the option to purchase the freehold rights to their new-build property after a period of time for an agreed fee (typically £2000-£3000), only for the landlord to then sell the freehold rights to an Investment Company who then charge the leaseholder severely over the odds to purchase it, often amounting to £40,000 or more.
It’s important to make sure you fully understand what purchasing a freehold or leasehold property entails, from potential charges and fees to your rights and responsibilities. The more knowledge you have, the easier it will be to spot any potential problems. If you have any questions, speak to your conveyancing solicitor.
If you are buying and selling a house and are looking for an experienced, full-service conveyancing team to guide you through the process, give our team a call on 0161 930 5350, e-mail email@example.com or obtain a free quote using our conveyancing quote calculator.
Through a very stressful process buying a first home, Gorvins were confident and collected. Able to deliver what they promised and kept me updated through the stages. I was glad to have No Stress experience with our conveyancer in amongst the chaos of the rest of it.
Used as recommended by my mortgage advisor for a remortgage. My case was dealt with by Natasha Sands and she made it complete smoothly and to my satisfaction. Communication was great and all my questions answered promptly. Will not hesitate to use again next time.
Fantastic service and for a fair price, special thanks to Joseph Hirst who dealt with my account from start to finish and was always on hand to deal with any queries I had, always got back to me in good time and made the whole process as stress free as possible.
Go with Gorvins, if you want peace of mind!
I recently instructed Gorvins to act on my behalf in the purchase of 5 apartments in Liverpool. I am happy to report that I was more than pleased with their performance.The services provided by the person in charge of the file at Gorvins was most professional, reliable and efficient. In fact she went out of her way to help in aspects which was not her responsibility and as a result the deal went through smoothly.
Get in touch
Gorvins Residential LLP
Gorvins Residential is the trading name of
Gorvins Residential LLP