If you’re currently in a leasehold property or are looking to purchase a property under a leasehold, it’s important to understand what it actually means. Whether it’s an older house, a new build, or a flat, you need to know what you’re getting yourself in for.

In this guide, we’ll explain what a leasehold is, what a freehold is, as well as the difference between the two. This should help you to decide whether purchasing the freehold for your property is worth the additional cost or not.

What Is Leasehold?

A leasehold is when you own the property but not the land the property is on. The land is owned by the freeholder so if you let the lease run out, the property will revert back to them. You will have a set period for the lease, which could be years, decades or even centuries.

In recent years, most new build homes and flats tend to be leasehold as you’re buying part of the property. However, in some cases such as in converted houses, the tenants may own a ‘share of the freehold’ equally to however many tenants there are. In a leasehold property, it is up to the freeholder to take care of any communal areas and the land around it. This is why many landlords ask for a service charge and/or ground rent to cover these costs,

What Is Freehold?

A freehold is when you own both the property and the land it is on for an unlimited time. You do not need to discuss any changes to your property with anyone, unless they are a major change. The main downside of purchasing a freehold for your property depends on your place of living. For a house, it can be simply to purchase the freehold from the landlord but for a flat, it would mean requiring the freehold for your part of the property but not necessarily for the entire building.

Leasehold vs Freehold

If the lease is less than 80 years, it is generally advised to steer clear of purchasing it. It makes it harder to extend the lease and won’t add much value to your property if you sell it further down the line. A shorter lease can also make it difficult to remortgage if needs be or get a mortgage at all on that property.

The longer you leave a lease to run out, the more expensive it can be. Whilst it can still add value to your property, the costs will far outweigh the amount you could earn back. There are benefits to having a leasehold property though. You don’t have to deal with any issues within the communal areas as that is up to the freeholder (you should notify them of any problems, so it is brought to their attention). You are often covered with buildings insurance as well, so that’s a cost that you do not have to worry about. It is usually covered in the fee for your service charge but make sure to check.

3 Reasons to Purchase a Freehold

#1 – The main reason to buy the freehold for your property is to avoid all the hidden costs of a leasehold: service charges and ground rent. These costs usually only increase with time so on top of every other cost rising, you will have to find additional funds for these two charges too.

#2 – You will have total control over any repairs, refurbishments or changes you want to make to your property. Whilst it might not seem like a benefit, it means you can pick the traders who make those changes, compared to the landlord, who may just use the same companies time and time again.

#3 – You also have a choice of where your money goes as well as how much you spend. With a leasehold, the landlord will take your service charges and ground rent and spend them on what they see fit, not what necessarily the tenants feel need improving. When you buy the  freehold, you can use the money to prioritise the work that needs doing to the property first.

We’ll guide you through the process

It is always important to check any contracts and legal documents when purchasing a property, whether it’s a leasehold or a freehold. There can always be hidden fees that you might not know about initially, so it is vital to check everything thoroughly.

There is a real lack of information out there when it comes to weighing up your options on whether to buy the freehold of your property or not. At Dootsons Solicitors, we are here to make the decision as seamless as possible.

Get in touch today to speak to one of our experts from the conveyancing department.