19th April 2018

Leasehold vs Freehold

There are a number of differences between Freehold and Leasehold properties and whether a property is Freehold or Leasehold can be an important consideration when purchasing a property.

With a freehold property, you own the building and the land outright. You would not have to pay ground rent or service charges to a landlord but you will normally be solely responsible for any repair and maintenance.

With a leasehold property you own the dwelling rather the land it is on. You have a lease of the property from the landlord (who owns the land) for a fixed period of time, known as the ‘lease term’, typically for terms of 99, 125 and 999 years. When this term comes to an end the property reverts to the Landlord. The Lease details the legal rights and responsibilities of both you and the landlord and your appointed solicitor should be able to provide you advice on those terms. The rules and obligations in a lease usually include restrictions on your use of the property, which could be, for example, the requirement to obtain the landlords consent for lettings, not keeping pets and for any alterations/additions to the property.   With a leasehold property you normally also have to pay a ground rent, maintenance costs (service charge) and insurance costs. If you breach the terms of a lease then it may be possible for the landlord to re-enter the property, end the lease and take possession of the property.

A positive of owning a leasehold property can be that maintenance and repairs are often the responsibility of the landlord and therefore you do not have to be concerned about organising any such repairs. The fact that a property is leasehold should not be an automatic cause for concern provided you are adequately advised on both your obligations and your rights.

Leasehold with a ‘share of the freehold’

If you are buying a property with a ‘share of the freehold’ you are still purchasing a leasehold property but a share of the freehold of the building/land on which the property is located is sold to you with the flat/house. The ownership of the freehold may be held by individuals in their personal names in which case your name would be entered on the freehold title in place of the Seller, or alternatively, and more commonly, a company is the owner of the freehold and some, or all, of the tenants hold a share or membership in that company. There are both advantages and disadvantages in holding a share in the freehold and we would be able to advise you further on those.

Additional aspects to a leasehold purchase

When purchasing a leasehold property there are some additional aspects to consider and a leasehold purchase can often take slightly longer to deal with due to additional documentation and the involvement of other parties such as the Freeholder and/or their managing agents. Additional considerations may include the following:

  • In addition to provision of proof of title the seller’s solicitors will provide a copy of the lease and any other relevant leasehold title documents such as deeds of variation and licences for alterations. A leasehold information form will also be supplied by the Seller.
  • Enquiries will be made with the Landlord and or managing agents to obtain information on the property including information on service charge and proposed works.
  • Any aspects of the lease that need addressing such as term, consent to any sale and requirements for notices will be dealt with by the buyer’s solicitors. A report on the terms of the lease and on the replies obtained from the landlord/managing agents will also be provided.
  • On completion of the purchase any required apportionments of the service charge/ground rent and any other amounts paid under the lease will be dealt with. The buyer’s solicitors will also inform the landlord of the completion of the assignment of the lease by serving a notice of assignment. A fee for this is usually payable.

We can assist if you would like further advice on either a leasehold or freehold purchase, or a property move in general. Please contact our residential property team at either our Petersfield (01730 268211) or Midhurst (01730 816711) office.