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The fundamental difference between freehold and leasehold

On February 14, 2018

The fundamental difference between freehold and leasehold

When we are buying a property there seems to be an endless list of factors to consider – price, location, transport links, local schools, crime statistics, local amenities etc. However, there is one very important factor that sometimes gets overlooked, particularly by first-time buyers – is the property you’re purchasing leasehold or freehold?

What are the differences between leasehold and freehold?

With Freehold you own the property and the land it stands on. So you have sole responsibility to maintain the whole building, but you also have the freedom to alter or add to the property as you like as long as it complies with building regulations and planning permission.

With Leasehold, however you have a lease to live there for a certain number of years (up to 999 years) but someone else (known as the ‘landlord’) owns the freehold. With a leasehold property you will pay an annual ground rent or service charge to the landlord and you may have to seek their permission before carrying out any alterations to the property.

Other things to be aware with a leasehold property are:-

  • The length of the leasehold- anything less than 80 years could have a seriously negative effect on the value of the property. The shorter the time, the greater the rate at which the property will decline in value
  • Leaseholds with new-builds- whole houses are normally freehold but there has been an increasing trend with new builds for the property to be leasehold. If you are buying a new build home it is important to check whether the property is freehold or leasehold and also to check the terms of the ground rent if it is leasehold. There have been some cases recently where the ground rent charges double every few years so they became so high that the properties became unsellable.
  • Be cautious of options to buy the freehold rights on a new-build property. It may cost you a lot more than you expect.
  • There is currently a proposal in Parliament to ban leaseholds on new-build houses in England

If you are a first-time buyer and want more advise on buying a leasehold property, get in touch with Peter Robinson & Co. We have over 30 years’ experience in the Conveyancing business and can help you all the way through the house buying process.

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