Leasehold vs Freehold: What’s the Difference?28th July 2023
You might have seen the term ‘leasehold vs freehold’ bandied about online, but how do they compare?
If you are looking to buy your dream home in Lancashire or Greater Manchester, you might be unsure which is the best option for you. In this guide, we’ll be taking a deeper look into each.
- Freehold vs leasehold: What’s the difference?
- The pros and cons of these property types
- A wide range of FAQs to cover the finer details
So, let’s begin…
Freehold vs leasehold: What’s the difference?
If you own a property on a freehold basis, you own not only the property itself but also the land where it sits.
Meanwhile, though a leaseholder does occupy the property, the land remains under the freeholder’s ownership. This is the main difference between the two – however, there are other important details to be aware of…
What is a freehold property?
As buying a freehold property gives you land rights also, you will be responsible for looking after both. This could include driveways, gardens, and any subsidiary buildings, such as garages and sheds.
This freehold property will remain yours to keep until you sell the property (for support here, we can help with sales of houses in North West England) or pass away.
Key features of freehold properties:
- Owned entirely by one person
- The owner can largely do what they want with the property
Can I buy the freehold?
Yes- and, as a result of doing so, you will own the home as well as everything associated with it. You won’t have to pay any ground rent or service charges and can choose whether or when you hand the home over to someone else.
What is a leasehold property?
Technically, once you have made a leasehold purchase, you own not the property itself but instead a lease permitting you to occupy that property.
Before moving into a leasehold property, you would sign a lease agreement specifying the period of time before the lease is due to expire.
Key features of leasehold properties:
- Leasehold properties are ‘borrowed’ much like buy-to-let homes
- You will need to pay a service charge to maintain the property
Can you change the terms of a lease?
At any time, you can request a lease extension from the freeholder. However, this building owner will charge you for the service, with the exact cost depending on the property.
The pros and cons of freehold vs leasehold ownership
The whole ‘freehold vs leasehold’ debate can potentially be divisive, given compelling arguments in favour of either side. Crucially, though, you need to think carefully about which option would be best for you personally.
Here’s the benefits and drawbacks of what you can expect from each property type:
|Permanent purchase||Flexible purchase|
|No ground rent charges||Lower upfront cost|
|No service charges||Fewer maintenance costs|
|Land ownership||Fewer day-to-day responsibilities|
|Complete control over the property||Easier to drop at short notice|
|Higher sale price||Additional costs apply after the sale|
|Harder to sell||You may have to extend the lease|
|More maintenance costs||Less control over the property|
|You would need to repair the property||You might still need to fund repairs|
|You have land to look after as well||The home can be relatively small|
If you reckon there are still a few more rounds to be fought in the freehold vs leasehold debate, the following FAQs could help you to declare a winner- or at least the route you ought to personally take.
How long can a lease be?
The lease period – that is, the amount of time before the property is returned to the freeholder – can be set to last years, decades, or even centuries.
How important is the length of a lease?
MoneyHelper advises you to opt for a lease that ‘has at least 80 years remaining or you might struggle to get a mortgage’ for the property.
As more time runs out on this lease, the property’s value can suffer. We have made it quick and easy for you to arrange a free online valuation of your home.
How can I find out how many years are left on the lease?
Simple: If you’ve opted for a leasehold property with us, you can ask us for a lease document including this information. For example, if the property you’ve purchased is in Burnley, contact our office in this Lancashire town and we’ll fetch you that information promptly.
Can a leaseholder buy the freehold?
If you own the lease to a house, you can potentially purchase the freehold through either of the following means:
- Asking the freeholder if they are willing to sell it to you
- Following a formal freehold-buying process as established by UK law
Much the same applies if you are leasing a flat and want to buy its freehold – but, in this instance, other occupants of the building would need to get involved too.
What is a flying freehold?
A flying freehold is where you own a property but at least part of it ‘lies under or hangs over another person’s land or residence’.
Examples of flying freehold properties include residences with:
- Balconies leaning over a neighbouring property
- Basements going under an adjacent home
- Rooms over a shared passageway or communal entrance
Interested in a leasehold or freehold property? We’d love to hear from you
Whether you fancy moving into either type of property in Greater Manchester or Lancashire or simply prefer the idea of becoming a landlord there, our award-winning team of estate and letting agents can help.
We work with a large pool of local contractors that you, too, can benefit from utilising. To learn more about our end-to-end service, please get in touch with one of our property experts today.