What is the Difference between Leasehold and Freehold?

22 March 2018

When buying a property in England or Wales, you will either be purchasing a freehold title, or you will be purchasing a leasehold title. Owning the freehold title means that you own the land and the buildings on it for an unlimited amount of time. Owning a leasehold title means that you are leasing the land and buildings from the freeholder for a set period of time.

Leases can be hundreds of years long, but they can be shorter. It’s important to check how long is left on the lease when purchasing a leasehold property. It might be possible to extend the Lease if they are nearing the end of their term, but the cost of this can run into the thousands. As a result, the length of the lease can directly affect the value of the property and it can also impact on whether a mortgage provider will lend against it.

Key Differences between Leasehold and Freehold Properties

Flats are commonly sold with leasehold titles, while houses are more commonly sold with freehold titles. But this is not a blanket rule. It’s important to check whether a property is leasehold or freehold if you’re considering buying it.

If you purchase a leasehold property, you will usually need to pay an annual “ground rent” to the person or organisation who owns the freehold. If you purchase a freehold property then no ground rent will be payable.

If you own a leasehold flat then the freeholder will usually be responsible for maintaining any communal areas of the property (if there are any) along with the external walls and the roof. This may not be the case if the leaseholders own a share of the freehold, in which case they might be collectively responsible for this maintenance.

For leasehold houses, it may be that the leaseholder is responsible for the maintenance of external walls and the roof. It’s worth thoroughly checking the wording of the lease when purchasing a leasehold property, as this will set out who is responsible for what. 

If you own a freehold property, then you will be responsible for maintaining the entire building yourself, including the external walls, roof and the land that it’s on.

For leasehold properties there may be a management company, who acts on behalf of the freeholder to look after the communal areas and fulfil other duties. These duties might include ensuring that the building is insured, collecting the ground rent and arranging gardeners or window cleaners to attend to the property.

In addition to the ground rent, there may be a service charge that you will need to pay, in order to cover these costs. You may find that the ground rent and service charge is payable directly to the management company, and that they are your point of contact for any issues with the building or communal areas.

Will it Take Longer to Buy a Leasehold Property?

Yes, the Conveyancing process is likely to take longer when buying a leasehold property than when buying a freehold property. This is because more legal work needs to be carried out before the purchase can complete.

If you are purchasing a leasehold property, your solicitor or conveyancer will need to request a ‘Leasehold Management Pack’ from the management company (or from the freeholder directly). This will include information about the property, previous management accounts, ground rent and service charge accounts, along with receipts of payment. You may be charged a fee by the management company or freeholder for providing this information.

The Leasehold Management Pack can take several weeks to put together, so this is a common cause of delay when purchasing a leasehold property. Once the pack has been received, your conveyancer or solicitor may need to request further information or ask questions, which can also add to the delay.

Once your Conveyancer or Solicitor is happy with the information provided, then the property purchase can proceed.

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