Buyers and property investors have two options when buying a property in the UK: freehold properties and leasehold properties. In simple words, freehold property is when you, the homeowner or the buyer, own the land with the property whereas leasehold property is when you own the property for a fixed period of time but you do not own the land that it is built on. While this may sound simple on paper, it is important to understand the technical differences between freehold and leasehold properties. Let’s compare freehold and leasehold properties and talk about how some UK properties may be both.
Freehold properties
Owning a freehold property means that the homeowner or the property owner owns the building as well as the land that it stands on. In that case, the homeowner is responsible for looking after the entire property, from the interiors to the exteriors as well as the land that the property is built on. According to estate agents in Leeds, there are quite a few benefits of owning a freehold property. First, you do not need to worry about the lease finishing as you own the property. Secondly, you do not have to deal with landlords or freehold owners as you are the sole owner. Lastly, you do not need to pay annual service charges, monthly rent or any other such costs associated with leasehold properties. However, when you invest in a freehold property, there are a few additional costs that you will have to incur such as the stamp duty, the land registry fees and any applicable council taxes. Also, you will need to pay the legal fees, the valuation fees, the estate agents fees as well as renovation or repair costs.
Leasehold properties
A leasehold property, as the name suggests, is a property that you own for a specific time as mentioned in your lease agreement with the freeholder or owner. Once the lease ends, the ownership automatically returns to the freeholder, unless the lease is extended. Normally a leasehold property can be taken on a fixed-term lease of 99 years, 125 years or 999 years. Usually, flats and apartments are leasehold properties, so if you own a flat in a building then you technically do not have a stake or share in the building. On the other hand, if you buy a leasehold house then it means that you own the property but you do not own the land that the property is built on. So, before you decide to buy a leasehold property you need to remember that you will essentially take on the lease of the previous owner. That means you need to check how much time is left on the lease, the service charges and associated costs of the leasehold property as well as how the length of the lease may be impacted in case the property is resold.
With that being said, some properties in the UK are both freehold and leasehold such as commonhold properties and flying freehold properties as these types of properties have certain elements of freehold properties and certain elements of leasehold properties.
Commonhold properties
Commonhold properties are basically a variant of freehold properties which were created recently by the Leasehold Reform Act of 2002. In simple words, a commonhold property is a multi-occupancy building that is split into different freehold units. What this means is that each flat or apartment in the building is considered a freehold unit in itself. So, the common areas such as the hallways, the staircases and the lobby are managed by the Commonhold Association of the building, which is a company that is created by the freehold owners of the various flats. That means the commonhold properties are not owned by any single person. In this case, there is no sole owner or superior freehold owner. Instead, the different freehold owners of the flats are in charge of looking after the building.
Flying freehold properties
Flying freehold property is one that is built over some land or under some land that is not a part of the property. For instance, properties built on steep hills, a part of a property such as a balcony that may hang over the neighbour’s land, some part of a property that is built on top of a shared alleyway or a cellar that goes under the neighbouring property are considered flying freehold properties.
