What’s the difference between Freehold, Leasehold & Share of Freehold?

You’ll have probably seen these on a property listing.  If you’ve ever wondered what it all means, here’s a brief explanation

Freehold

If you own the Freehold you own the property and the land on which it is built.

As the freeholder, you’re responsible for maintaining your property and the land, therefore you’ll need to budget for these costs.

Most houses are freehold, although some might be leasehold, usually through shared-ownership schemes.

The benefits of being buying a freehold property are:

• No service charges or ground rent
• No dealing with the freeholder
• No need to worry about the lease running out and having to renew it.

Very rarely, you might come across a Freehold Flat (not the same as Share of Freehold – see below).  These are a complex proposition and obtaining a mortgage could be tricky.  You should seek advice immediately from your mortgage adviser and legal representative if you’re considering buying a freehold flat.

 

Leasehold

Most flats in the UK are leasehold, whereby you own the property for the length of your lease agreement. When the lease runs out the ownership of the property reverts back to the freeholder, unless you extend the lease. Within the lease it sets out what you can and cannot do.

Tips to consider when buying a leasehold property:

• Check how many years are left on the lease – if it’s less than 90 you should take advice
• Find out how much the service charge & ground rent are per year including any future increases that are written into the contract.
• Ask about the running of the building – is there a fund for unexpected costs? Is maintenance regularly scheduled and costed?  Are there any major works on the horizon?

Some houses are sold as leasehold – if this is the case it’s worth exploring in more detail with your mortgage adviser and legal representative.

 

Share of Freehold  

Not to be confused with a ‘Freehold Flat’ (see above), when a flat is described as ‘Share of Freehold’ this usually means that the flat is leasehold and it is being sold with a share of the Freehold.  In this situation you are both Freeholder and Leaseholder.  This is almost always a good thing because:

• You have ownership of the building (usually along with other leaseholders)
• You have a say in how the building is run and the power to appoint a managing agent
• You can extend a short lease without paying a premium to the freeholder
• There shouldn’t be any ground rent in the lease

Having a share in the freehold can save thousands of pounds and avoid conflict compared to the freeholder being a third party, but being responsible for the building yourself is no small job and there are many laws and regulations to comply with.  For this reasons most resident-owned freeholds appoint a professional managing agent to ensure affairs are managed properly.

 

There are lots of considerations when buying a property, that why it’s important to take legal advice from a conveyancer (solicitor) and independent mortgage advice.  So get in touch or sign up to our monthly newsletter – we’ll be delighted to help you understand your options.

 

Will Sproule – 26th May 2022

 

 

 

 

 

 

 

 

 

Sources:

https://www.gov.uk/leasehold-property

https://www.moneyhelper.org.uk/en/homes/buying-a-home/leasehold-vs-freehold-whats-the-difference