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Leasehold vs freehold

Who is this page for?

If you’re looking to move house, or you’re buying a house and want to know more about the difference between leasehold and freehold, this is the page for you. 

Difference between a leasehold and freehold

When you’re looking for a new home, you might come across the phrases leasehold and freehold. These are two types of property ownership, with a few key differences between them:

Leasehold ­property

You own the property for a set period, but not the land it’s built on. The term of a leasehold is usually set when the property is built. This term begins when you buy the property and can last between 125 and 999 years.

Once this set period (lease) ends, the property will return to the owner of the land. Flats are often sold as leaseholds.  

Freehold property

You own the property and the land it’s built on. There is no limit on how long you can own the property.

Find out more about these terms in our guide below. 

How do you find out if a property is freehold or leasehold?

If it doesn’t say on the sale details or website whether a property is freehold or leasehold, you can:

  • Search for the property in the Land Registry or Land and Property Index.
  • Ask for a copy of the deeds to the property, which will tell you what type of ownership the house is under.
  • Ask your solicitor or estate agent to find out for you. 

You should also be able to find out how long is left on a leasehold property using these sources. 

What is a leasehold property?

If you buy a leasehold property, you own the house or flat for the set period shown in the lease contract. You won’t own the land that your property is built on. This will be owned by whoever owns the freehold – a third party landlord.

Leaseholds are more common on flats than houses, although some new-build houses are sold as leaseholds on shared-ownership agreements.

Charges on leasehold properties

If you’re buying a leasehold property, you will probably have to pay fees and charges on a regular or one-off basis.

The biggest of these is the monthly service charge, which often covers:

  • Upkeep of gardens or grounds
  • Utility bills covering shared spaces, like corridor lighting
  • Repairs and maintenance

You may also have to pay additional fees as part of a leasehold contract, including:

  • Ground rent – This is rent for the land your property sits on. Your landlord must ask you if they plan to increase ground rent, unless increases are clearly stated in the original lease.
  • Admin charges – The freeholder may charge admin fees if you request changes to your leasehold agreement.
  • Building insurance – There may be a fee to cover the building insurance the landlord is paying. You may be asked to arrange this yourself.

Cost to extend a leasehold

To extend a lease, you’ll usually have to pay the landlord a fee, as well as cover admin and legal costs. The shorter the lease, the higher the fees will be. It could run into the tens of thousands of pounds.

After you’ve lived in a property for two years, you can request a lease extension.

Another option is to buy the freehold outright. If the landlord wants to sell the leasehold, leaseholders are usually given first right of refusal to buy it. 

What is a freehold?

When you buy a freehold property, you’ll own the property and the land it sits on. You won’t have a landlord or pay monthly service charges or ground rent. You can own the property for as long as you like.

 

Benefits of a freehold

Owning a freehold property has many benefits when compared to owning a leasehold. With a freehold, you own the house, there’s no rent, charges or leases to run down. It’s yours forever – or until you decide to sell.

 

What is a share of a freehold?

Having a share of a freehold means you own part of the freehold, instead of the owning it outright – this usually occurs when buying a freehold flat, rather than a house.

It can give you more control over your flat than a leasehold, as you’ll be directly involved in making decisions about the property and land. 

If a freehold is split among lots of shareholders and any decisions have to be made as a group before they happen.

Not all lenders have the same criteria for freehold mortgages, so be sure to check before buying a freehold property.

 

Can I buy a freehold flat I am currently leasing?

Buying the rights to your freehold flat – or even just a share – can be difficult. You might have to pay more if you already have a long lease.

However, you may find you end up saving on lease extensions and there is a chance that you could add extra value to the property.

The content on this page is for reference and does not constitute finance advice.

For impartial financial advice, we recommend government bodies like the Money Advice Service.

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