Freehold vs. Leasehold

If you are buying a house, or have a general interest in property, you may have heard the terms freehold and leasehold.  As legal terms they may seem somewhat complicated, but they can be boiled down to the simplest of meanings:

Freehold

You own the property and the land on which it is built for as long as you want.

Leasehold

You own the right to reside within the property for a set period, but you neither own the property, nor the land on which it is built.

Freehold ownership is the most simple of the two – your deeds specify what is owned by you, and you will be responsible for repairs, maintenance, and upkeep of the grounds.  Typical freehold properties will include houses, bungalows, and other free-standing structures.

Leasehold can be more complex, and your lease will contain all the details relating to your rights and responsibilities, as well as those of your freeholder (the owner of the building and land).  

Typically the freeholder will be responsible for the maintenance of the building, upkeep of the grounds, and other such matters, although leaseholders will bear the costs of such work through the service charge.  

There may also be restrictions as to how the property can be used/occupied, whether the property can be let out, and whether you can keep pets.  

Every leasehold property is different and, when buying a leasehold property, you should ensure that your legal advisor explains the lease to you, and how it will impact upon your use of the property.

The most common leasehold properties are flats and maisonettes, although it is not unusual to encounter leasehold houses, bungalows, and all other forms of residential properties.

Most importantly, a lease can impact upon the value of a property.  This can be through restrictions as to the use of the property or, more commonly, as a result of the length of the lease (the value of the property will start to decrease once the lease drops below 85 years) or level of any ground rent payments.  In the case of the latter two examples, the value of the property can be restored by extending the lease, which will add a further 90 years to the term, and reduce ground rent payments to a peppercorn (the legal term for nothing).

It’s never too early to consider extending your lease, and Watsons can provide you with an assessment of how much a lease extension is likely to cost. 

For further information, please contact James at j.laughlin@watsons-property.co.uk.

To discuss extending your lease, please contact our Customer Services Team at 01603 751577 or email: survey@watsons-property.co.uk