Leasehold or freehold
Most property in England and Wales is owned on a freehold basis. If you own a house you will usually own the freehold and with a flat or an apartment you will typically own a lease instead.
Scotland has its own version of freehold, called ‘feuhold’, and leasehold property is very rare.
Whether you own the freehold, or just the lease, affects your property rights and who is responsible for maintenance costs.
What is freehold?
If you own the freehold it means you own your property and the land it is built on. This means, subject to planning laws, you can do what you like such as adding an extension or changing the garden. You can also pass it on to your heirs when you die.
But as the freeholder you are also responsible for any maintenance or repairs that need doing to your property – although of course you can decide whether to do them or not.
What is leasehold?
Under a leasehold agreement, you are effectively buying the right to live in and moderate the interior of a property for as long as the lease lasts. However, you will generally not own any communal parts of the building – such as lobbies and gardens in a block of flats – and you won’t own the land that your property is built on. Broadly speaking, this means you own everything within the walls of your property, including the floorboards and plaster but nothing outside of it, including the roof.
If you buy a leasehold property you are only able to live there for as long as the lease lasts, once this runs out, the property returns to the freeholder. If there is less than 70-80 years left on a lease you may struggle to get a mortgage for that property, or to sell it. But, once you have been living in a property for two years you can apply to extend the lease by up to 90 years – although you will have to pay to do this.
The freeholder will charge you ground rent to live in your property – this is usually a small amount, around £100 – £200 a year. You will also need to pay service charges to cover the cost of maintenance and repairs to communal areas of the building. The freeholder might manage this or employ a property management company to do it.
One of the risks of owning a leasehold property is that the freeholder may have the right to demand large sums of money to pay for external renovations to your property. This is particularly common in older blocks of flats, so it’s important to ask about scheduled and anticipated works before you buy a leasehold property.
Can I buy a freehold?
It is possible to purchase the freehold of a leasehold property under certain conditions, but this process, known as enfranchisement, can be lengthy and costly. You should seek advice from a solicitor or the Leasehold Advisory Service for more information.
Another option, if you live in a building with several flats in it, is to buy a share of the freehold along with the other leaseholders in the building, known as commonhold. In order to buy under a commonhold arrangement over half of the people living in the building must agree to buy a share. The owners will then collectively own the freehold and be responsible for its upkeep.
Getting mortgage help
If you want to find the right deal for you it is worth getting impartial, expert advice. One of our advisers can help you find the right mortgage to purchase your leasehold or freehold home.
You can speak to a Which? mortgage adviser by calling us on 0117 981 7787 or request a call back. Our advisers look at every mortgage from every available lender, and because they’re paid a salary – not a sales commission – you can have confidence that you’ll receive truly impartial advice.