Freehold and Leasehold Property - Making the Right Choice
Recent reports of homeowners being stuck in a leasehold trap have highlighted the importance of understanding the difference between freehold and leasehold properties. With the Competition and Markets Authority announcing an investigation into possible breaches of consumer protection law in the leasehold housing sector, we’re looking at what you need to know about freehold and leasehold ownership.
Benefits and drawbacks
As with anything in life, there are pros and cons that come with each option. Whether you choose freehold or leasehold ownership will depend upon your own unique circumstances.
Most houses in the UK fall under this category. Essentially, if you buy a freehold property, you own everything – that means the property itself as well as the land it is situated on.
The advantages of freehold ownership
The main draw of buying a freehold property is that the homeowner has full control over everything. There are no landlords to contend with, no leases to expire and you don’t have to budget for extra expenses like service charges or ground rent.
The disadvantages of freehold ownership
The flip side of having autonomy over your property is having to shoulder the complete responsibility for your home and land including all repairs and property maintenance. As well as not having a landlord to rely on to sort out any problems with your home, buying a freehold property usually comes at a higher cost, so your budget might be a factor.
Most flats are sold on this basis, however in recent years there has been an increasing trend for leasehold houses. With leasehold ownership, you’re buying the right to use and occupy a property for a specified number of years but don’t have any right over the land on which the property is situated.
The advantages of leasehold ownership
Lower costs are often an advantage. You also won’t have to worry about shouldering the responsibility of the general maintenance of the property as that will remain the obligation of the freeholder, although you can come to an agreement as to your individual rights and responsibilities.
The disadvantages of leasehold ownership
The downside of not being having the responsibility of building maintenance is that you’ll need to budget for things like service charges and ground rent in addition to your mortgage payments.
As there is a both a leaseholder and freeholder in the relationship, there is more potential for complications or disputes to arise. There are also often restrictions on what you can and cannot do on or with the property such as making building alterations or keeping pets on the premises.
Leasehold offers less assurance than freehold ownership in that, if you breach your lease, it can become forfeit. Also, as some recent cases demonstrate, if you’re not careful with the small print, you could find yourself stuck with spiralling ground rent charges, high repair bills or other expensive surprises.
Making the right choice for you
Understanding the advantages and pitfalls of freehold and leasehold agreements can help you make a more informed choice in what is one of the most significant life decisions you’ll make. With more new-build homes being sold under the more complex leasehold agreement, it’s even more important to do thorough checks on your what type of ownership you will have on your new property.
Whatever route you take, it’s always better to get advice from a conveyancing expert. At Rowberry Morris our property lawyers are on hand to give you specialist legal advice, whether you want to buy a new home, extend your lease or resolve a dispute with the freeholder over your leasehold contract.
For more information on how the Rowberry Morris team could help you with your property matter, contact our property law experts today.
The contents of this article are intended for general information purposes only and shall not be deemed to be or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.