Freehold Vs Leasehold Property: What is the Difference?

Wondering what is the difference between freehold vs leasehold properties? In this article, we will discuss the major difference between freehold and leasehold property.

Related: How To Choose The Right Conveyancing Solicitor

What is Freehold?

Freehold describes a type of interest in land. If you own a Freehold property, this means that no-one else (other than a co-owner) has any ownership rights over the land. There may be rules that govern what you can and can’t do on the property (covenants) however there is no other owner of that land. 

Also See: Licensed Property Solicitors in Coventry

The alternative to Freehold is Leasehold, which is much more complex. Under Leasehold ownership, rather than owning the land you have an interest in the land for a set number of years (the term). The Lease is a document which sets out the number of years and the terms and conditions with which you must abide during that term. The Lease is granted by the freehold owner of the land, so the ownership of the freehold is superior to that of the leasehold. 

How do I know whether a property is Freehold?

The Title Deeds for a property will set out whether the ownership is Freehold or Leasehold. For most properties in England, this information is stored at HM Land Registry’s central database (registered properties) and copies of the title deeds can be downloaded for a small fee. 

The register entries will specify whether they are describing a Freehold interest or a Leasehold interest. Speaking very generally, most houses will be Freehold, whereas most flats will be Leasehold as this is the easiest way to divide up blocks with multiple ownership (and ensure any communal expenses are dealt with fairly). 

Also See: Licensed Property Solicitors in Coventry

Having said this, there have been a number of Leasehold houses created in recent years, so Freehold ownership cannot be assumed. Your conveyancer will be able to advise you in more detail on the title of your specific property. 

Definition of a Freehold House and a leasehold house

If you own a freehold house it means that you own the house and the land beneath it outright forever. You are known as the freeholder. You own the freehold house ‘title absolute’. A freehold house is normally a standard single house and you are responsible for it. 

If you own a leasehold house you own a lease from the freeholder for a term of years. Leases are for long periods of time such as 999 years. The owner of the freehold house can also be known as the landlord. A leaseholder and the landlord have responsibilities to each other that they must carry out during their ownership.

What is the difference between a freehold house and a leasehold house?

Owners of a freehold house do not have a requirement to pay ground rent to anyone. A Leaseholder is liable to pay ground rent, maintenance fees, service charge and a share of buildings insurance to the owner of the freehold house. The owner of a freehold house is responsible for maintaining the property as a whole themselves and does not need to request permission for works to be carried out to the house.

The owner of a leasehold house may be subject to certain restriction over the property, for example you may not be allowed town pets in a leasehold house and if the restrictions are not adhered to or obligations within the lease are not met, the owner of the freehold house may demand that the leaseholder forfeits the lease.

Freehold – The land and the property

The terms freehold and leasehold are used to describe a property’s tenure or type. Freehold property owners as a rule of thumb own both the property itself and the land it is built on. This means you generally have more freedom in what you can and cannot do with the property you own and is most common in older properties of approximately 30 plus years or older. Freehold property is usually the easiest to convey from a solicitors perspective and as you are responsible for the upkeep of the entire plot, freehold property owners can avoid management fees and costly management packs required on the majority of leasehold matters.

Freehold Vs Leasehold

A large percentage of modern properties are being built with leasehold tenure in mind, this means that the owner of the property does not own the land it is built upon unlike with Freehold.

Usually this is passed under the guise of shared maintenance responsibility. The most common example of which is flats, some of the reasons behind opting for leasehold over freehold is to ensure everyone contributes appropriately to the repair and upkeep of the building.

For example, in a freehold property, you would repair the roof if it leaked but in a leasehold you would contribute jointly between all leaseholders to maintain the roof. It would be unfair to expect just the top floor apartments to look after something which benefits the whole building.

Beware though that even Freehold properties can carry obligations to pay towards upkeep of communal shared spaces on a development, like a park or shared accessway.