What Is The Difference Between A ‘Freehold’ And A ‘Leasehold’ Property?

Posted on: 16 July 2019

James Askew at CGT Sales explains the difference between freehold and leasehold properties.

What is a Freehold property?

  • The freeholder of a property owns it outright, including the land it’s built on.
  • A person who owns the freehold interest in a property may grant a lease on it to another person, the leaseholder.
  • Most houses are freehold but some might be leasehold – usually through shared-ownership schemes.
  • If you buy a freehold property, you’re responsible for maintaining both property and land, so you’ll need to budget for these costs.

What is a Leasehold property?

  • A leasehold involves the temporary right to occupy land or property.
  • Most flats and apartments in England and Wales are held on leases. A lease will be for a fixed term.
  • Historically most flat leases were for 99 years, although more recent leases may be for 125 years.
  • It is also not uncommon for leases to be for 999 years.
  • If you own a leasehold property, you don’t own the land.
  • This means you won’t be responsible for maintaining and running the building. The landlord will do this or appoint a managing agent to do so for them. However, the leaseholders share the costs of this by paying a service charge to the landlord.
  • You might also be asked to pay into a sinking fund, to help cover any unexpected maintenance work needed in the future.

Things to consider...

What are benefits of a freehold?

  • A freehold property tends to maintain its value when the property market remains even, and will increase in value when house prices rise. However a leasehold property will lose value over time.
  • At the beginning of a long lease both freehold and leasehold properties can be a similar value. However, as the lease gets shorter, the leasehold property reduces in value.

Things to consider when purchasing a leasehold:

  • How many years are left on the lease.
  • How you’ll budget for service charges and related costs.
  • How the length of the lease might affect getting a mortgage and the property resale value.

If you have any questions about freehold or leasehold, or anything about sales, please get in contact. We’d love to hear from you.

James Askew – CGT Sales Ltd

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