Freehold or Leasehold: What Is Best for Me?

June 17, 2022

A house or flat sold as a freehold or leasehold can influence your purchasing decision. A leasehold property means that you own the building but not the land. With a freehold property, you own both the land and building.

What are the advantages and disadvantages of a leasehold and freehold property? If you are thinking about buying a leasehold property, are there ways to extend the lease or purchase it? This article answers these questions and more.

What is a freehold?

If you purchase a property freehold, you are the sole owner of the entire property—both the house and the land it sits on. This means you are responsible for all property related costs—building insurance, the cost of repairs, and any liability issues. However, because you own the land and the property, there are no extra costs for maintenance.

In most cases, houses are sold as freeholds. However, some flats are also freeholds where you own part of the land along with the other flat owners.

What is a leasehold?

If you buy a leasehold property, your ownership rights are limited to the period stated in the lease. Once the lease ends, legal ownership of the land and property returns to the owner, also called the ‘freeholder’. With a leasehold, you typically pay annual ground rent and must get permission to make certain modifications to the property.

Advantages & Disadvantages of a Freehold

The advantages of freehold ownership are that it’s simpler and less restrictive. Because you are the owner, you have complete control over what happens to the property. Also, you are free from paying annual service charges or dealing with the landlord or freeholder.

The only disadvantage of buying a freehold property is that it’s more expensive. However, this is logical since you purchase the land and the building.

Advantages & Disadvantages of a Leasehold

The advantages of leasehold properties are that they are cheaper to buy and you have fewer responsibilities. For example, the freeholder is liable for the building upkeep and insurance but you will contribute to these costs via a Service Charge.  A leasehold flat may have certain perks, like private parking, concierge services, a gym or a resident’s lounge, again the costs contributed to via the Service Charge.

The biggest issue with a leasehold is that you are restricted with what you can do. You may also have to pay hefty fees to make changes to the property and in addition, some freeholders don’t allow pets or let leaseholders run a business from home.

Another disadvantage is the lease term. It can be challenging to sell a leasehold property if fewer than 80 years remain on the lease as some mortgage providers won’t lend on them.

Extending the lease

You can extend the lease after living in the property for more than two years.

However, there are two ways to arrange a lease extension when buying a property with a shorter lease than 99 years:

  • Before buying the leasehold property, ask the seller to extend the lease. This process usually involves using a specialist conveyancer or property solicitor.
  • Buy the property, then negotiate an extension of the lease term with the freeholder. If they refuse, you must wait two years.

Can you turn a leasehold into a freehold?

It is possible to purchase the freehold of your property if you have owned it for more than two years. However, the process can be lengthy and costly.

You can turn a leasehold into a freehold in a block of flats. But this requires that all residents agree to buy the freehold jointly.

In Conclusion

Buying a freehold property gives you more freedom to do what you want with the property. However, a leasehold with 99 years or more could be a more advantageous option, even considering regular service charges.

The decision to buy a freehold or leasehold property comes down to your budget, the type of property you want, and the lease length. Therefore, it is advisable to calculate all associated costs before buying a house or flat.

Here at Stadium Residential, we are dedicated to ensure all our clients experience a high standard of service. Get in touch with our team today to explore your options.

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