Freehold and leasehold are two different types of property ownership in the UK. Anyone considering buying a property here will need to know the meanings of both terms, as there are considerably different obligations and privileges bestowed upon the owner in each.
The owner of a freehold property owns both the home and the land it is built on outright, having an unlimited right to live there and make alterations to the property as long as they are within the law and rules like planning permission etc are followed. Freehold is the simplest and most desirable way to own a property – it never expires and cannot be revoked for breach of contract or similar problems.
With some properties the issue of ‘flying freehold’ becomes relevant: this is where a property’s boundary extends over land which is not part of it, for example a balcony extending above another person’s land.
If you purchase a property that is leasehold, you are buying the right to live in a property for a set period of time. The freeholder sells the right to you and it reverts back to them when the lease runs out. 99 years is a pretty common length of time for a leasehold property, the duration of the lease directly affects the price of the leasehold.
Leaseholders own everything within the walls of their property, including the walls themselves. The freeholder is responsible for the structure, the land it is built on and any communal areas. Leasehold is the most common way for flats to be owned, as it avoids ambiguity as to who is responsible for a common area and protects leaseholders in the event of damage to the property. Getting a mortgage for a leasehold property can be difficult and will depend on the length of time left on the lease.
Recent developments in UK law have created a new type of ownership which is becoming a popular alternative to leasehold for flats and buildings with common areas:
With a commonhold property the residents of a block of flats come together to form a ‘commonhold association’, which owns the freehold of the building and takes responsibility for repairs and maintenance. Anyone who buys a property in the building has to agree to become part of the commonhold association.
Commonhold solves many of the problems caused by leasehold and the fact that there are no expiry dates or landlords involved makes it an attractive option for buyers. Commonhold ownership, however, is a new development in the UK and is still at a relatively experimental stage. It may be possible to convert leasehold to commonhold, a professional will be able to advise you on this.
There are all kinds of complex legal issues associated with property ownership in the UK, if you’re considering buying a property here a solicitor will be ensure that everything is clearly outlined and that the risk of problems occurring is minimal.