Two types of domains and tenures of property law dominate the occupancy and homeownership in the UK, freehold, and leasehold.
Though both look similar, the differences get revealed as you delve deeper into the laws, rules, and regulations surrounding them.
The complexity of situations can be tricky. Hence, it is essential to know about them. This blog tells you about the difference.
You own property under freehold ownership when you own the building and the land it is built on. It also includes the garden as well as perimeter areas.
Your name is entered into the land registry as the freeholder. You own the absolute title of it.
As far as legal definition is concerned, freehold ownership is the absolute and permanent tenure of a property or land with the freedom of disposing off.
The sole ownership, control to its maintenance, service provision, and everything about the upkeeping of the home are some salient aspects of freehold ownership.
What does it mean? It means there is no service charge or ground rent is imposed on the property by any third party.
A freehold owner is supposed to be responsible for the maintenance of the home. The owner is legally responsible for the “fabric of building”, that means areas that include the exterior walls and roof of the house.
It also includes any internal or external communal areas alongside other owners, if applicable.
Freehold is the most popular tenure of houses in the entire country.
Types of freehold properties
- A freehold house with one or multiple occupancies
- A freehold block of flats that contains rented as well as leasehold occupancies
- Freehold garage
- Freehold Office block
- Freehold land
Advantages of Freehold
- You own the property fully, and there is no need to worry about the lease. The title deed gets inherited by the next of kin (or goes to the stipulated receiver).
- It is possible to make modifications in the property after obtaining relevant permission from authorities.
- You can keep pets and other domestic animals, not otherwise prohibited by the law.
- You get competitive rates for services, repairs, and maintenance.
- There is no need to pay service charges or ground rent.
A leasehold property is obtained by entering a contract between the landlord and the tenant (called lessor and lessee). It is for a finite period.
The process of leasehold involves various contractual obligations and responsibilities. Both parties are bound to it.
The lease document contains:
- The total length of the lease
- Itemization of service change
- List of prohibited actions
- Ground rent charges
- Maintenance obligations between both parties
- Details of change in ground rent
Leases are usually offered on a long-term basis, typically 99 years. Leases that go beyond 80 years are considered long leases.
The leaseholder can’t truly own a leasehold property as it is on lease from the freeholder. A house that the leaseholder can occupy for 10 years doesn’t worth the same as a house for 99 years.
Properties that are with leases shorter than 80 years will not get a mortgage from mortgage lenders. The leaseholder doesn’t have any option than selling it to a cash buyer. Or he can extend the lease or buy the freehold.
If you buy a property that is available with a short lease, then it means you have to extend the lease as soon as possible.
Both leasehold and freehold properties have benefits and shortcomings. It depends on the circumstances and legal and commercial complexities.
Based on the situation, one can decide which one is more suitable, profitable, and manageable.