Purchasing a property is likely one of the biggest financial decisions you’ll make in your lifetime. As such, it’s crucial to understand the different types of property ownership when buying a home in the UK. The two main forms of ownership are leasehold and freehold – and there are some significant differences between the two that every homebuyer should be aware of.
A leasehold property is one where you own the right to live in and use the property for a fixed period of time, typically ranging from 99 to 999 years when first purchased. However, you do not own the land that the property sits on – this is owned by a third party known as the freeholder.
As a leaseholder, you are essentially a tenant, albeit for a very long period. In addition to the purchase price, you are required to pay ground rent to the freeholder on an annual basis, as well as service charges to cover the maintenance of communal areas like hallways, gardens and exteriors.
The lease is a legally binding agreement that sets out your rights and responsibilities as a leaseholder. When the lease expires, ownership reverts back to the freeholder unless you have extended the lease or purchased the freehold during your ownership period.
In contrast, with a freehold property you own the house or flat outright, as well as the land it stands on – permanently. There is no time-limited lease involved and no ground rent or service charges to pay (aside from standard council taxes).
As a freeholder, you have complete ownership of the property. This means you are solely responsible for the maintenance and any required repairs or renovations. You also have more flexibility over making alterations compared to a leaseholder.
While there are fewer ongoing costs with a freehold property, this comes with the trade-off of higher purchase prices and the burden of covering all repair costs yourself.
Now that we’ve covered the basics of each ownership type, let’s take a closer look at the key differences:
Ownership Rights: With a leasehold, you have temporary ownership for the lease duration. A freehold grants you permanent, outright ownership.
Ground Rent & Service Charges: Leaseholders pay annual ground rent to the freeholder, plus service charges for shared areas. Freeholders do not pay these fees.
Lease Term: Leaseholds have a finite lease length, typically long but will expire eventually if not extended. Freeholds have indefinite ownership.
Property Renovation: Leaseholders may have rules around home renovations/alterations. Freeholders have more flexibility.
Repairs & Maintenance: Leaseholders pay for internal repairs, freeholder covers exterior/communal areas. Freeholders are solely responsible.
Communal Areas: Leaseholders share responsibility and costs for maintaining shared spaces. Freeholders manage independently.
Resale Value: A shorter lease can make a leasehold property less valuable over time. Freeholds tend to hold value better.
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Remaining Lease Term: For leaseholds, look closely at how many years remain on the lease. Extending gets more expensive with shorter leases (<80 years).
Service Charges & Ground Rent: Understand all the fees you’ll need to pay annually and what services they cover. Check for any review provisions that could increase costs.
Buying the Freehold: As a leaseholder, you may have the option to buy the freehold and become the outright owner. This involves premium costs.
Lease Extensions: Extending your lease can be a way to preserve property value as a leaseholder, but costs rise significantly with shorter leases.
At Innovus, we provide expert leaseholder asset management services. We act as an informed, professional point of contact for leaseholders in managing their property investments.
Our team has extensive experience and knowledge across both leasehold and freehold properties. We can advise on negotiating fair lease extensions, purchasing freeholds, service charge consultations and more.
With a transparent, honest approach and competitive pricing structure, Innovus is a trusted partner for leaseholders in optimising and protecting their assets.