Leasehold versus Freehold: What is The Difference Between The Two?
There are two fundamentally forms of legally home ownership: freehold and leasehold. Though many estate agents tend to gloss over it, there are few things more important about your home that is worth buying and one that isn’t. some people who do not sort this out when they consider buying a home so they end up regretting it.
The following is about a brief description and the difference between leasehold and freehold that you can consider before deciding to buy a property.
If you own the freehold, it simply means that the building and land are owned exclusively by you, in perpetuity. It therefore is your name in the land registry as “freeholder”, and you then can own the “title absolute”.
When you buy freehold, you then are responsible for maintaining and managing the property, and you will of course need to budget for these costs. When initially purchasing a property, the building and land survey can highlight any potential dangers, but such issues that appear or are found after sales will be your responsibility.
Furthermore, don’t forget as a freeholder, you are ultimately responsible for your house in ways that may affect your local council or community like border disputes, overhanging trees, noise pollution, or general appearance.
However, as the freeholder, you have some benefits that you don’t have to:
- Worry about the time left on your lease in the leasehold agreement, as you own the property outright
- Deal with a landlord (or the freeholder of the land that your building is on)
- Pay annual ground rent, services charges or any other landlord charges.
With a leasehold, you can use the property and its land for a number of years depending on the length of your lease agreement with the freeholder (sometimes known as the landlord). The lease may be for as long as 999 years, but it can be as short as 40 years. Once the lease ends, ownership return it to the landlord unless you are able to extend the lease at a price.
If owning a property leasehold, you won’t have any responsibility over its land. The freeholder, directly or through a management agency, takes on the management of the building, gardens and communal spaces.
As a tenant, you then must:
- Have a contract with the landlord, setting down the legal rights as well as responsibilities of either side
- Pay an annual “ground rent” to your freeholder
- Share some costs with the freeholder such as maintenance fees, service charges and even the buildings insurance
- Have the permission for any major works done to the property
When purchasing a leasehold, you will take over the lease from the previous owner. Hence, before making an offer, make sure to consider these things:
- How long is left on the leasehold
- How it can affect getting a mortgage and the resale value of the property
- How you will budget for services charges and other related costs.
Do I Need Buildings Insurance for My Leasehold Property?
In general, buildings insurance will be managed by the freeholder even though the insurance costs can come from the service charges. Owning a leasehold, you can be entitled to see a full report on how your money is spent on maintaining and managing the property, including the landlord’s insurance.
Another Way of Owning A Property: A Share of A Freehold
You now can purchase a share of the freehold with other leaseholders (for example, with other people who live in a small block of flats) if at least half of them agree to buy a share. Together you must then serve a “Section 13 Notice” to the freeholder of that property.
This can give you full collective ownership and more control over the home. Together you can now take responsibility for the running, managing and maintaining the building. Also, buying the freehold from the owner, you can easily extend your lease fairly for up to 999 years.
However, it can be expensive to purchase a freehold as you and the other leaseholders may need to set up a company for the building management, or find a managing agent to do this for you.
Leasehold versus Freehold: What is The Difference Between The Two? Reviewed by BingNow on 11:58:00 PM Rating: