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  • Writer's pictureJonathan Norcutt

The Difference Between Freehold and Leasehold Property

Tuesday 12th March 2024

(information contained within was correct at the time of publication but is subject to change)


When scouring the property market, you may have come across the terms leasehold and freehold. In this article, we are going to explain the difference between freehold and leasehold property so that you can move forward with confidence in your property ownership journey. 


Join us as our expert mortgage advisors explain the meaning of leasehold and freehold, discussing the main differences between each, and answering some common questions surrounding both home ownership options. 



Explained: Difference Between Freehold and Leasehold Property


If you’re searching for a mortgage to buy your first home, you may have felt stuck when coming across these terms. You may be wondering what they are and what they have to do with mortgage borrowing. 


Front of a freehold property bungalow

While they may sound complex, these property ownership options have fairly simple meanings, but they are quite different from one another, which means it pays well to know the key differences between freehold and leasehold property, allowing you to choose the right property ownership option for you.



Freehold Meaning 


Most homes in the UK are freehold, and this means that – as opposed to leasehold – you own your property outright, including the land it is situated on. It’s important to keep in mind that when you purchase a property that is freehold, you will own the property, but you must keep up your mortgage repayments to avoid your mortgage lender repossessing the property. 


Key in the door of a freehold property

Even though most residential properties are freehold, it does not mean that they all are, so you should check this on your property search. For example, most flats are leasehold, unless the freehold is shared between neighbours. 


Another difference between freehold and leasehold property is that when you own a freehold property, you are responsible for covering the cost of maintaining the property. Such costs include general repairs and home improvements. 



Leasehold Meaning 


If you purchase a leasehold property, that means you will own that property or building, but not the land it is on. All leasehold properties come with a lease term – this is the number of years you will own the property. Because, with a leasehold, you will not own the property indefinitely. New leases can range from having a lease term of 99 to 999 years. 


External picture of a block of leasehold flats

When the lease term comes to an end, the ownership of the property will be transferred to the person who owns the land. This person/entity is also known as the freeholder or landowner. This aspect of only owning the property and not the land it’s on for a set amount of time is the main difference between freehold and leasehold property. 



Freehold or Leasehold: Which is Better?


If you desire to take complete ownership of your home, then freehold would be the option to go for. In terms of simplicity and ease, freehold is the ideal choice. With the flexibility and ownership that freehold provides, a freehold property will likely come with a higher upfront cost than a leasehold property. 


Couple stood outside their new freehold property

However, with a leasehold, there is a strong possibility of additional costs during the term of your lease. The landowner may charge you fees for such things as building maintenance costs. With a leasehold, there may also be certain restrictions in place that may conflict with your own plans, such as not being allowed to have pets. 


That being the case, there are some benefits to purchasing a leasehold property – as part of your purchase, you may gain access to communal facilities, and factors such as building repairs and insurance will likely be arranged by the freeholder. Residential homes that are leasehold are easier to stomach when they have a longer-term left on the lease. The longer the term, the better for you. With a shorter lease, the property may be harder to sell or raise a mortgage against (yet, lenders will vary in minimum years required). 


Open kitchen of a leasehold property

Ultimately, the biggest difference between freehold and leasehold property is that with leasehold, you will own the property for a set amount of time but not the land. With freehold, you own the property and land fully as long as you keep up your mortgage repayments if you don’t own the property outright. 



Leasehold vs Freehold Pros and Cons


Here, we will clearly list the pros and cons of both leasehold and freehold, allowing you to see which property ownership option suits your circumstances and future goals. 


external picture of two storey freehold property

Advantages of Leasehold 


  • Cheaper upfront and overall costs compared to freehold 

  • The freeholder/landowner is usually responsible for building maintenance and insurance 

  • The purchase of a leasehold property could include access to communal areas, such as a gym or secure car parking



Disadvantages of Leasehold 


  • The shorter the term of your lease, the harder it will be to sell the leasehold property 

  • Ground rent – regular payment to the freeholder for their land 

  • The freeholder may enforce certain restrictions, such as no pets allowed, no sub-letting, or no running a business from home 

  • Leaseholders may be required to pay towards the cost of works done on the building 

  • In the case of new ownership, payments you already pay can be increased and new fees introduced on short notice

  • You do not own the property in perpetuity – you only own it for a set amount of time

  • You do not own the land the property is on 



Advantages of Freehold 


  • You will own the property outright 

  • There is no freeholder/landowner to deal with 

  • With no freeholder, you won’t need to pay ground rent or fees that a leaseholder may be required to pay, such as maintenance costs for a communal area 

  • No freeholder means there are likely no restrictions imposed on your property, such as not being allowed pets

  • Freehold is considered the simplest, most flexible property ownership option 



Disadvantages of Freehold 


  • Higher upfront and overall costs compared to leasehold 

  • As the freeholder, you will be responsible for the cost of keeping and maintaining your property 



Frequently Asked Questions on Leasehold and Freehold Properties 


In the following sections of the article, we will answer some FAQs regarding leasehold and freehold properties, including: 

  • How long can the lease be on a leasehold property?

  • What properties can be leasehold?

  • Can you buy the freehold of a leasehold property?

  • Who owns a leasehold property?

  • Leasehold property: who pays building insurance?

  • How do you find out how many years are left on a lease?

  • Can you extend your lease on a leasehold property? 

  • Is freehold property an asset?


Young family carrying boxes into their new freehold property


How long can the lease be on a leasehold property?


There is no set amount of years a lease has to be. However, most commonly, a leasehold term is 99 or 125 years. Leases could have a term of up to 999 years. 



What properties can be leasehold?


Some houses can be leasehold properties; this is likely the case if they were bought through a shared ownership scheme. But, mostly, it’s flats that are leasehold properties. 



Can you buy the freehold of a leasehold property?


Yes, it is possible to buy the freehold on a leasehold property you have owned for two or more years. However, if the property is a flat, you can only purchase the freehold if all residents agree to do so on a joint-ownership basis, and as long as the freeholder is willing to sell. If the property is a house, this is a much simpler process.



Who owns a leasehold property?


The ownership of a leasehold property belongs to whoever owns the land. This can be either a person or entity. 



Leasehold property: who pays building insurance?


The freeholder of a leasehold property is typically responsible for building insurance and building maintenance costs. However, leaseholders may be required to contribute to some costs in the form of service charges.



How do you find out how many years are left on a lease?


How long is left on a lease and when the lease started should be on your lease document. If you are a potential buyer, this information will typically be given directly to you or your solicitor. 



Can you extend your lease on a leasehold property? 


It is possible to extend a lease on a leasehold property subject to an agreement with the freeholder. However, if you have held the lease for less than two years, the freeholder can refuse. 



Final Thoughts on the Difference Between Freehold and Leasehold Property


In conclusion, the main difference between freehold and leasehold property is that with a leasehold, you will own your property (not including the land) for a set amount of time. When that term is up, the property’s ownership will be transferred to the freeholder. With freehold, you own the property and land completely. 


Young family in open space living area in their freehold home

We hope this article has provided some clarity on these differing property ownership options, and if you are buying your first property or moving home, and are split between leasehold or freehold, our team of Mortgage brokers can help. 



How Norcutt Mortgages Can Help With Leasehold and Freehold Properties 


We are an award-winning mortgage broker that specialises in leasehold and freehold property ownership. Our team navigate the property market and consider the most suitable home ownership options for our customers. We achieve this by understanding the current circumstances of our customers and using our knowledge, expertise and connections to obtain the most favourable mortgage deals possible.


Speak to our team today to see how we can help you.


YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE 

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