Leasehold vs. Freehold – what’s the difference?

Are you thinking of buying a property? If yes, then there are two fundamental legal ownership that you should consider, freehold and leasehold. If you want autonomy ownership, then you should find freehold, but if you want less responsibility when it comes to property maintenance, then leasehold is the best bet.

For you to be in the best position to make the right decision, you need to know the differences between leasehold and freehold.

 

What is leasehold?

Leasehold is a property tenure that states that once you own a lease of the prescribed property, you’re entitled to use or live in the property for the specified timelines, but you neither own the land nor the property. Below are some of the features of leasehold

• There is a legal contract between the freeholder and a leaseholder that sets legal responsibilities for both sides.

• Freeholders typically take responsibility for maintaining the building’s common parts such as staircase, entrance hall, roofs, and walls.

• Leaseholders pay annual service charges, maintenance fees, and the buildings’ insurance share.

• Usually, leaseholders pay the freeholder the annual ”ground rent”.

• Leaseholders must obtain permission from the freeholder before any major works on the building.

• In some cases, leaseholders may face some restrictions, such as subletting and owning pets.

• If the leaseholders do not fulfill the terms of the contract, for instance, not paying the fees, the lease can be a forfeit.

 

What is a Freehold?

This is a category of property ownership. Unlike leasehold, freehold you own the property, the land, and even the air above the acquired property. Here are some of the features of freehold.

• One doesn’t pay the annual ”ground rent.”

• As a property owner, you don’t have the freeholder’s inconveniences failing to maintain the property or charging you enormous maintenance fees.

• A property owner has the mandate of maintaining the fabric of the property.

Pros and Cons of Freehold vs. Leasehold

There are a couple of things you need to consider here. Hence, it’s essential to take sufficient time to know which one will serve your current and future needs since the two involve a significant investment.

Freehold implies that you buy a property, and you don’t depend on another party for maintenance and use an extra amount of money for ground rent and services. This is for those individuals who do not want to be bothered by property owners when it comes to property maintenance and renovations. The downside of this arrangement is that they tend to be so expensive compared to leaseholds.

On the other hand, leasehold ties the buyer to the freeholder’s rules and conditions. The conditions include how the buyer will use the property, and even the changes heor she can make on the property are subject to the freeholder’s endorsement. This limits the buyer in many ways. This works well for those individuals that are looking for short term accommodation because it offers lower costs.

Disputes Between Freeholders And Leaseholders

Like any other venture, it’s common to have some tension between the freeholders and leaseholders.

• The main contention is fees; many leaseholders feel like freeholders are overcharging and have little to do about it. They argue that ground rent and annual charges are so exorbitant, and they don’t reflect the value of money.

• The other dispute is the maintenance of the building. The majority of leaseholders complain about the common areas tidiness and the building’s standards. It must be noted that leaseholders lack power over any work done on the property, and they also find it challenging to get the necessary job done.

• Finally, freeholders also have some complaints regarding the leaseholders’ behavior. Some leaseholders breach the lease contract, such as making much noise.

Can One Extend A Property’s Lease?

Yes, it’s possible, and it can be extended. The extension can be beneficial too. The extension increases the property’s value and allows one to renegotiate some of the lease terms, such as who manages the features in the building and the ground rate.

When it comes to leasing extension, you have to meet some of the conditions:
• Can you afford the extension fee?

• Is your original lease longer than 21 years?

• And you must stay in the property, minimally two years.