Freehold and Leasehold are two of the main types of property you can buy. When buying a property freehold, you own the land and building until you decide to sell. However, when buying a property leasehold, you only own the building for a defined period of time. Unless you extend the lease, the property then belongs to the landowner once the lease expires. 

This blog will help you understand the difference between freehold and leasehold, and what you need to know before buying a property leasehold.

What is Freehold?

Buying a property freehold gives you total ownership of the building and the land it is situated on indefinitely. You will be responsible for costs such as maintenance and insurance of the property. However, you have more freedom when it comes to changing the property and restrictions on the building. Most houses are freehold, but it is important to check this before buying.

What is Leasehold?

If you purchase a property leasehold, you own it for the duration of the lease. When the lease runs out, property ownership transfers to the landowner (the freeholder). Leases are usually long term, lasting from 90-125 years. But they can be as short as 40 or as long as 999 years. Leases can also be extended if they are close to running out. A property can become difficult to sell or remortgage if there is less than 80 years on the lease. 

A major factor to consider when buying a property leasehold includes paying ground rent, service and maintenance charges to the freeholder. These costs can increase. There also may be regulations on the property regarding matters such as pets, running a business from home and sub-letting the property. 

It is common for flats and some new-build properties to be owned under leasehold. You do also have the right to buy the freehold after owning the property for two years. This is less complex if you are looking to buy the freehold on a house where you are the single owner. However, for a block of flats, the freehold would have to be purchased by all residents under a joint agreement. This is possible but can be more difficult to arrange. 

Benefits of a Leasehold Property

So, why would you buy a property leasehold? With more restrictions and risk, you may be wondering why it would be worth buying a leasehold property. There are, however, benefits which come with a leasehold. 

Buying a property leasehold is usually cheaper than freehold because it involves risk. You also have no responsibility for the structure and maintenance of the building, maintenance of communal areas, and building insurance costs. If the lease still has 90+ years remaining, there is little reason to worry about extending the leasehold.

Before purchasing a property, either freehold or leasehold, it is important to understand the terms and implications. This could make a difference to your investment long-term. If you are looking for more information and opportunities for property investment, get in touch with us at Hoze Investments.