Freehold vs Leasehold. The age-old debate

When it comes to buying property in the UK, there are two main types of ownership: freehold and leasehold. While both types of ownership come with their own benefits and drawbacks, understanding the differences between the two is important before making a decision.

Freehold ownership is the most straightforward type of property ownership. When you own a freehold property, you own the land and the building(s) on it outright. This means you have complete control over the property and can make any changes or improvements to it as you see fit, subject to planning permission and any other legal requirements.

On the other hand, leasehold ownership is a more complicated arrangement. With leasehold ownership, you own the right to live in a property for a set period of time, typically 99 or 125 years. However, you don’t own the land the property is built on; that belongs to the freeholder. Instead, you pay the freeholder an annual ground rent and may also have to pay service charges for the maintenance of communal areas and shared facilities.

While leasehold ownership may seem less desirable than freehold ownership, there are some benefits to it. For example, many flats and apartments in the UK are leasehold, so if you want to live in a specific location or building, leasehold may be your only option. Additionally, service charges and ground rent can cover the cost of maintaining the property and communal areas, which can be beneficial if you don’t want to deal with the hassle of maintaining your own property.

However, there are also some downsides to leasehold ownership. For one, you may be limited in what changes or improvements you can make to the property. If you want to make significant changes, such as adding an extension, you may need to get the freeholder’s permission. Additionally, ground rent and service charges can increase over time, which can make the property more expensive to maintain.

Another potential issue with leasehold ownership is that the freeholder can sell the freehold to a third party without your permission. This means that the new freeholder can increase the ground rent or service charges, which can be problematic if you’re on a fixed budget.

Overall, the decision between freehold and leasehold ownership will depend on your individual circumstances and preferences. If you want complete control over your property and don’t mind taking on the responsibility of maintenance, freehold ownership may be the way to go. On the other hand, if you want to live in a specific location or building and don’t want to deal with property maintenance, leasehold ownership may be a better fit. Either way, it’s important to do your research and consult with a mortgage professional before making a decision.