You’ve probably already seen freehold and leasehold mentioned whilst on the hunt for your new home, but what do those words even mean? Below we explain just that and give you a flavour of the general pros and cons of each.
What does freehold mean?
When you buy a freehold property, you own the building and the land that it’s on for as long as you like. You have complete control over the property.
Pros of a freehold?
- It’s all yours to do what you want.
- You don’t have to pay for ground rent, admin fees or service charges.
- There’s no time limit (lease) to consider.
What are the cons of a freehold?
- Freeholds can be more expensive to buy because the freehold is an asset in it’s own right.
- You own everything, so every issue and repair is on you to fix and pay for.
What does leasehold mean?
With a leasehold, you own the property , but unlike freehold, you only own it for a set amount of time. Once the lease runs out, ownership of both the property goes back to the freeholder, who can either be a person or a business.
These leases tend to be very long (some up to 999 years) and transfer from seller to buyer. You typically to see leases on flats as someone (the freeholder) needs to look after the overall structure of the block of flats and communal areas.
What are the pros of a leasehold?
- You’re not responsible for maintaining or managing the communal areas and the land — that’s the freeholder’s job. As such, you won’t have to pay out for big things like structural problems
- Leaseholds can be cheaper to buy.
- You have the right to ask your landlord for a lease extension.
What are the cons of a leasehold?
- You typically have to pay services and factor fees for maintenance, plus admin fees and ground rent.
- The freeholder can decide to increase the ground rent whenever they like.
- You have to give the property back once the lease ends (although they tend to be so long this doesn’t happen).
- The freeholder can deny your request for a lease extension.
- It can be more difficult to get a mortgage on, or sell a property with a lease that’s under 80 years.
- As the lease gets shorter, the value of the property can go down too.
- There can sometimes be restrictions around things like subletting, running a business on site, or making structural changes.