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What’s the difference between leasehold and freehold?

When moving, whether it be up the ladder or buying a property for the first time, it can be easy to become confused by jargon and legal terminology.

Bridging loan, early repayment charge, equity – the terms you hear when buying a property can seem endless and bewildering.

Renowned for our straight-talking, jargon-free approach, we aim to demystify the legal process which is why we have put together an overview of the difference between leasehold and freehold properties - something many property buyers struggle with.

What does freehold mean?

If you choose to buy a freehold property then you are buying the property itself along with the land it stands on. As the owner your name will appear in the land registry and (assuming you pay your mortgage), you will own the property for as long as you want.

Should I be wary of buying a leasehold property?

Leasehold purchases are less desirable than freehold because it means you are only ‘leasing’ the property for a number of years. Unlike renting however, leasehold properties come with long-term leases, anything from 90 to 999 years. The longer the leasehold the better, particularly in terms of resale further down the line. While purchasing a property with a short lease should be carefully considered, there is the option to extend the lease, providing certain conditions are met, usually by 90 years for flats and 50 years for houses. While this will add value to the property, lease extensions can be costly.

The freeholder of the property (the person who owns the land/whole of the building for flats), has responsibilities and these will be set down in a contract. These responsibilities typically include maintaining common areas such as the entrance and roof. 

In addition to the purchase price, leaseholders will also have to pay ground rent – an annual charge payable to the freeholder. Other disadvantages to a leasehold property is that before doing any major work to the property the freeholder’s permission must be sought.

The relationship between leaseholder and freeholder can sometimes become fraught and common reasons for this include disputes about property maintenance, fees and breaches of the lease.

How do I know if the property I am interested in is freehold or leasehold?

This is an important consideration and something best to know from the outset. The estate agent responsible for marketing the property you are interested in should be able to tell you whether it is leasehold and if so, how much time is remaining on the lease. If the property is leasehold it may be worth talking with your property solicitor or conveyancer to find out what impact this could have on your intention to buy.

Can I get a mortgage on a leasehold property?

Not all mortgage lenders offer mortgages on leasehold properties. Those that do will have a set of criteria you must meet in order to get your loan. In particular, lenders will want to see a long lease left on the leasehold. You may also find that the ratio of how much you can borrow against the property is less on a leasehold property than on a freehold, so bear this in mind when it comes to saving for a deposit.

No matter the type of property you purchase, you need trusted legal advice to ensure your investment is protected. Our team of residential property solicitors are on hand to help support you through the process, whether it is a sale, purchase, remortgage, leasehold or freehold. Contact us to find out more about our property and conveyancing services.