What does leasehold and freehold property ownership mean?

Posted 26/02/2019

The two main forms of land tenure in the UK are leasehold and freehold. Within this article Holmes & Hills conveyancing solicitors discuss the key differences between the two different types of property ownership.

What does freehold mean?

When you purchase a freehold property, you own both the building and the land. Houses are predominantly freehold (although some may be leasehold).

Owning a freehold property means you own the property outright so there is no ground rent or other maintenance fees, which you may find with leasehold properties. Instead, you are in charge of the upkeep of the property and land and any costs associated with this.

What does leasehold mean?

Leasehold properties have been typically associated with flats, although in recent years an increasing number of newbuild houses may be leasehold. It is estimated that more than 4 million properties in England are leasehold.

With a leasehold property, you own the property but not the land that it resides on. Instead, you will typically pay for a lease on the property, which once it ends will mean that the it will return to the freeholder who owns the land. With a leasehold property you will often be required to pay a ground rent fee and possibly a maintenance fee, which covers the upkeep of the grounds and gardens and other communal areas.

The length of the lease is a crucial consideration when purchasing a leasehold property. A lease can run for up to 999 years, but anything under 80 years is considered to be a short lease. We’ve previously discussed some of the key considerations of buying or selling a property with a short lease in our article here. However, a short lease can make it very difficult to sell a property or to re-mortgage a property and so needs to be a key consideration by anyone considering purchasing a property with a short lease.

Extending a lease

Once you have owned the property for at least two years it is possible to ask for a lease extension under the Leasehold Reform Housing and Urban Development Act 1993. The alternative is to agree terms of a new lease through discussions with the freeholder. Either way both will often require a lease extension solicitor to assist owing to the complexity of the process. If you own a leasehold property with a short lease, it is important to consider a lease extension before the lease gets to below 80 years

Commonhold ownership

There is a third type of land tenure - commonhold. This is essentially a type of freehold ownership that is designed to assist those owning a flat to have full ownership of their property rather than needing a lease. This means that everyone within a block of flats would come together to form a company which then essentially owns that freehold. This type of ownership is still fairly uncommon although there have been increasing calls for more new build flats to be built in this manner.

Each type of property ownership has a number of considerations that need to be factored into account when considering purchasing a new property. For further advice please contact Holmes & Hills on 01376 320456 (Braintree) or 01787 275275 (Sudbury).



Keeley Livingstone

Posted 26/02/2019 by:
Keeley Livingstone
Partner and Head of Residential Property Team

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