Freehold
Freehold is when you own the property and the surrounding land. It is when you have bought the property outright or mortgaged it. You are the sole claimant to the property. The only other person/s who has authority is the bank or building society which you have taken out a mortgage within the past. The bank will only intervene with the property if you have not paid the mortgage. This property is usually for people looking to stay in one place for a long time as there is no tenure for how long you can live there.
Advantages
- You have the right to modify the property, however, is desired -subject to planning permission.
- You would face fewer limitations should want to transfer the ownership of the property to someone else.
- A higher chance of being lent money to finance the property.
- You will not have to pay annual ground rent on top of your mortgage and other utilities.
- There is potential for the property to rise in value.
Disadvantages
You would be responsible for all the maintenance that is required on the property.
It is often more expensive than leasehold property.
Leasehold
When you own a leasehold, you own your property (subject to the leasehold’s terms) for the length of your lease agreement with the freeholder. You do not own that the land that surrounds the property. The freeholder would lease the property to you for a certain amount of time. The majority of the time, leases are usually long term, often 90 years or 120 years and as high as 999 years. A shorter lease is around 40 years long. Apartments or flats to be sold on a leasehold are likely due to someone owning the building.
Advantages
- It is cheaper for you to buy a leasehold property.
- Even though you are responsible for maintaining your property, you will not be liable for any maintenance surrounding the property.
Disadvantages
- You must gain permission from the leaseholder if you wish to make any significant change to the property.
- You will have to pay ground rent and service charge to the freeholder. The amounts are at the digression of the freeholder.
- A short lease may prevent the resale of the property or your ability to get a mortgage.
- Your lease is subject to conditions that may limit the way you can use the property. For example, whether or not you can have pets.
- If you wish to extend your lease, it can be an expensive route.
Disclaimer
Please note – this advice is only liable for England and Wales. If you are in Scotland or Northern Ireland, please seek alternative routes.
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