Leasehold and freehold are the two most common types of property ownership, but there are significant differences between the two. In general, most houses are sold as a freehold and most flats are sold as a leasehold. However, a growing number of houses are being sold using a shared ownership agreement, which is a slightly more complex version of a lease.
What does freehold mean?
A freehold property is where you own the property and the ground underneath that property. For the most part, this is straightforward, as it means you don’t have to pay a ground rent nor do you have to worry about who pays what for maintenance – you pay everything.
What does leasehold mean?
A leasehold property means there are two owners: the leaseholder and the freeholder. The freeholder owns the ground underneath, whereas the leaseholder owns the building. In many cases, particularly in the case of flats, the leaseholder is responsible for exterior maintenance and maintenance of shared spaces.
There are clear advantages to freeholds in general, but most flat owners must buy a leasehold. As a result, a leasehold is a good way to buy a property provided you understand what it involves and the costs you must pay on an ongoing basis. Check that the leasehold agreement is well-written and enforceable and always double-check the value of the ground rent and the length of time the lease has left. If you want to check the value of your property, check out our instant online house valuation tool to see what we think it’s worth. There are, of course, plenty of other things to look out for when buying a property as well as the leasehold status. It’s always worth doing your research before viewing properties so you know what you’re looking for.
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