When purchasing residential property in the UK, one of the key questions your solicitor will ask is whether the property is leasehold or freehold. Each type of ownership carries different rights, responsibilities, and potential legal challenges that buyers should be aware of before deciding to proceed with the purchase. Sharon Galley, Head of Property at JMP Solicitors, explains the differences between leasehold and freehold ownership.
Freehold Ownership
If you purchase a freehold property, you own both the building and the land it sits on outright, without time limits. As the freeholder, you have complete control over the property, and you won’t have to pay ground rent or service charges to a third party. This makes freehold ownership more straightforward.
The primary benefit of freehold ownership is security and independence. There is no risk of the lease running out or having to negotiate extensions. Freeholders also avoid potential conflicts with a landlord or managing agent, which can arise in leasehold arrangements.
However, with this independence comes full responsibility. Freeholders are responsible for all repair and maintenance costs to the property, including the roof, exterior walls, and any communal areas if the property is part of an estate.
Leasehold Ownership
Leasehold ownership, on the other hand, means you own the property for a fixed period under the terms of a Lease, typically ranging from 99 to 999 years, but you do not own the land. The freeholder (landlord) retains ownership of the land, and once the lease expires, ownership of the property reverts to the freeholder unless you negotiate an extension.
As a leaseholder, you have certain rights, but you are also bound by the terms of the lease agreement.
One of the significant legal challenges with leasehold properties is the potential cost of extending the lease. As the lease term decreases, the value of the property can drop significantly, and lenders may be reluctant to offer mortgages on properties with short leases. Additionally, the cost of extending a lease can be substantial, especially if the remaining term falls below 80 years.
A benefit of Leasehold is that although you are responsible for the maintenance of your property, the freeholder retains responsibility for the maintenance of communal areas such as stairways, corridors and any external communal areas, which you will pay a ‘Service Charge’ for. The freeholder may also arrange the Buildings Insurance. The freeholder may also charge you a yearly ‘Ground Rent’.
How Can JMP Solicitors Help?
The decision between leasehold and freehold property involves weighing the long-term legal benefits and implications of each. While freehold offers more control and stability, leasehold can pose challenges related to lease terms, costs, and ongoing fees. If you are considering buying a property, call 01476 565 295 or email [email protected] to understand your rights and obligations fully before making this important decision.
