What is Freehold Ownership?

In the simplest terms, freehold ownership means that you own the property and the land it stands on outright. It's yours until you decide to sell it or pass it on through your estate. This is the most common form of ownership and it gives the property owner the most control over the property.

Advantages of Freehold

Owning a property freehold brings a number of advantages:

1. Full Control: You have complete control over the property and the land, allowing you to make alterations without seeking permission from a third party, subject to planning permissions and building regulations.

2. No Ground Rent: As a freehold owner, you are not obligated to pay annual ground rent, which is a common requirement with leasehold properties.

3. Long-term Investment: Freehold properties can often be more attractive to potential buyers, making them a valuable long-term investment.

What is Leasehold Ownership?

In contrast, leasehold ownership means that you own the property but not the land it stands on. Instead, you lease the land from the freeholder (also known as the landlord) for a specified period of time—this could be decades or centuries.

Lease Length and Its Implications

The length of the lease is a crucial factor in a leasehold property. As the lease gets shorter, the property's value decreases. In general, if a lease is below 70 years, you may struggle to secure a mortgage and sell the property.

Ground Rent and Service Charge

As a leaseholder, you must pay an annual ground rent to the freeholder. You may also need to pay a service charge for the maintenance of common areas if you live in an apartment building.

Key Differences Between Freehold and Leasehold

Control over Property

The most significant difference between leasehold and freehold ownership lies in the control you have over your property. Freeholders have more autonomy as they own the land and the building, while leaseholders are often subject to the rules and regulations of their lease agreement.

Costs

Costs can also differ. While freeholders might face higher initial costs, they do not have to pay ground rent or service charges. On the other hand, leaseholders often have lower purchasing costs but must account for annual ground rent and service charges.

Longevity of Ownership

The duration of ownership is another important factor. Freehold ownership is perpetual, while leasehold ownership is time-bound, tied to the length of the lease.

Making the Right Choice

The decision between a freehold or leasehold property will depend on your specific needs and circumstances. If you value complete control over your property and wish to avoid ground rent and service charges, freehold might be the best option for you.

However, if you find a perfect property in an ideal location that happens to be leasehold, it shouldn't necessarily be a deal-breaker. Just be sure to consider the length of the lease and the associated costs, and perhaps seek legal advice to ensure you fully understand the terms of the lease agreement.

Check out Rent-to-Own: An Unconventional Path to Owning Your Dream Home with Extra Perks to see if that is the right choice for you.

Conclusion

Whether you choose to buy a leasehold or a freehold property, understanding these terms is a critical first step in making an informed decision. As you navigate the complexities of the real estate world, always remember that knowledge is power. Take the time to understand the implications of freehold and leasehold property ownership types. It's your money, your investment, and your future home—make sure it's the right choice for you.

If you’re ready to sell your home, visit unrealestate.com/sell to start a listing on the MLS for free, or find your perfect home at unrealestate.com/search.

We'd love to hear your thoughts about this article and our blog. Let us know how we did by completing the Unreal Estate Blog Feedback Survey.