Leasehold vs. Freehold – Buyers Beware
When buying a new home there are many things that you need to look out for. One of the key things you should consider is whether the property is leasehold or freehold. Not only could this affect your mortgage, but also your finances long-term.
What does Leasehold mean?
A leasehold property is where you own the property but not the ground it is built on. Typically this would be a block of flats. Once you have bought your property you will still be subject to pay an annual ground rent fee to the landlord (sometimes known as the freeholder). When the lease expires the ownership of the property reverts back to the freeholder. You will only own a leasehold property for a fixed period of time. Having said that, leases are usually long-term, often 90 years or 120 years and sometimes as high as 999 years.
Rights and Responsibilities
You have the right to:
- Get information about service charges or insurance
- Know the landlords (freeholder’s) name and address
- Made aware of maintenance and running costs
- Challenge certain charges under some circumstances
It is your responsibility to:
- Request permission to make any structural changes
- Make any repairs/damage to the property
You are able to extend a lease if it is due to run out. This can cost around £5,000 to add 90 years to the lease, not only will this secure the property reverting back to the landlord. But will also add value to your property if you go to sell it.
Something you should check before buying any leasehold property is how long the lease has left. Not only will this decrease the value of your property and make it hard to resell. It will also affect you securing a mortgage, as most mortgage brokers would advise you have over 85 years left on the lease.
What does Freehold mean?
A freehold property is when you outright own the property and the land it sits on. The owner has no time limit on the period of ownership. You are able to use the land for any purpose. However, you must be in accordance with the local regulations.
This tends to be the more favoured option for buyers, but not always obtainable due to the increased costs.
If you need any help in buying your new home, please head over to our website where one of our personable property lawyers would be delighted to assist you throughout the moving process.