When it comes to purchasing a property, whether you want a freehold or leasehold is one of the most important decisions you’ll make. Both options have their own pros and cons, and having knowledge and understanding of these differences is crucial to making the best decision for you. In this blog, we’ll define the basics of freeholds and leaseholds and outline the advantages and disadvantages of each to help you navigate this key choice in your real estate journey.
The key distinction of a freehold property is that you own the building and the land it stands on.
Pros of Freehold Properties:
Complete Ownership: Due to the complete ownership there are no disputes over property rights.
Control: You can make changes to your property and land, provided you comply with any legal and planning restrictions.
Service Charges: You have the control to choose your own service providers meaning you can find providers with lower charges, and with a quality you are happy with.
No Ground Rent: Freehold properties do not typically involve ground rent payments.
Cons of Freehold Properties:
Higher Price: Freehold properties can be more expensive because you own the land and the home.
Maintenance Responsibility: You have full responsibility for looking after the property and land.
Neighbourhood Disputes: You must navigate disputes and agree on shared costs with neighbours without a freeholder’s intervention. This can be especially difficult when you have a freehold within a flat building.
Leasehold means you own the property but not the land it’s built on. The land is the property of the freeholder, so when your lease expires, ownership technically reverts to them.
Pros of Leasehold Properties:
Lower Cost: Leaseholds are typically more affordable because you don’t own the land.
Maintenance Assistance: Maintenance responsibilities are shared, reducing your workload.
Third-Party Handling: Any Issues that arise can be dealt with by the freeholder or their agency.
Insurance: You don’t have to worry about insurance as it’s often arranged by the freeholder.
Cons of Leasehold Properties:
Time Limits: Every Leasehold has an expiration date, and renewing the lease can be expensive, especially if the lease has less than 80 years left.
Ground Rent: Some leasehold agreements involve ground rent payments.
Service Charges: Leaseholders may charge to cover services and maintenance.
Limited Control: You may need freeholder consent to undertake major extensions.
In conclusion, the decision between freehold and leasehold properties is determined by your individual preferences, budget, and long-term plans. The pros and cons of each should be carefully considered before making your decision. Understanding these different property types is crucial to finding your dream home that’s a perfect match for your financial goals.