Freehold vs Leasehold – Key Differences
Today we will be discussing the differences between freehold and leasehold properties where either of the two could be on the market. Most common tends to be freehold properties. Freehold properties just means the ability to sell the property at will at any point. Essentially what you own as a freehold property is everything which includes the land, bricks and mortar on it and you are absolutely free to do with it as you will as long as it complies with government regulations. The second form of ownership tends to be leasehold with flats it can also indeed be houses. Generally it involves the administration and ensuring that a block of apartments are run well. If for instance you had a building where you had a ground floor flat and a first floor flat both have the benefit of the foundations of the building and the roof to keep it sheltered and you need some kind of administration system set up so that the ground floor flat does not have the control of the roof and is reliant on the maintenance and the first floor flat does not have control of the foundations so they are reliant on the administration to ensure that it remains stable and repairs would be undertaken.
You also need to ensure the building is insured in case of a disaster and therefore leaseholds were set up so that there are restrictions to do with what the occupiers are and are not able to do which can include a pet, as well as not doing anything illegal or immoral. Or for instance if there is a balcony not hanging out your washing there as it may look unsightly may be another common restriction. Another restriction is ground rent which is generally some form of money paid annually however it is not always money and you may often hear the term peppercorn ground rent which means the ground rent is paid in the form of a single peppercorn. Such a term does not have any monetary value but it makes the lease valid. The second point of difference is within a leasehold your likely to have to pay a maintenance and service charge as there may be common areas to the building such as external decoration, garden areas a common hall way that needs to be cleaned and insured and the maintenance and service charge covers such items.
If you are a buyer looking at leasehold property it is wise if the information is not immediately apparent ask the estate agent how much the ground rent is, how much is the maintenance and service charge. Additionally it is also wise to ascertain and ask the estate agent what is the length of the lease because it will be for a fixed term typically the shortest leases start off with 99 years and the longest is 999 years however years will runaway and it could be a lower term and you need to ask those questions. Once you have obtained this information you should take some advice as there are a number of people you can ask such as the estate agent, your solicitor and your mortgage advisor if you are unsure about any of those aspects. With all those points hopefully that provides you a better insight into what the difference is between freehold and leasehold.