Leasehold vs Freehold: Understanding the Differences
Choosing between a leasehold or freehold property is one of the most important decisions you’ll make when buying a home. Both types of properties have advantages and drawbacks of their own. In order for you to make an informed choice when it comes to buying a property, this article aims to help you understand the distinctions between leasehold and freehold properties.
What is Leasehold?
Leasehold refers to the right to use the property for a specific amount of time, usually between 99 and 999 years, but not the right to own the land it is situated on. Instead, you pay the freeholder—the landlord—rent for the land the building is constructed on. Ownership of the property passes back to the landlord when the lease period ends.
What is Freehold?
When a property is freehold, you fully own both the building and the surrounding land. The property is entirely under your control, and all upkeep and repairs are your responsibility. You are not required to pay a landlord any ground rent or service fees as the property owner.
Leasehold vs Freehold: The Pros and Cons
- Because you are only purchasing the property and not the land it is situated on, there are lower upfront costs.
- The landlord typically bears responsibility for maintenance and repairs.
- Leasehold homes frequently stand in neighborhoods with shared facilities like gyms or gardens that the landlord maintains.
- The landlord must receive payment for ground rent and service fees.
- Limited control over the property because you might need the landlord’s approval to make any major changes or renovations.
- The property’s ownership could revert to the landlord if the lease period expires.
- There is no ground rent or other fees due to the landlord.
- You have full authority over the property, including the right to make alterations or renovations without getting consent.
- The property is yours, so you are free to sell it whenever you want.
- Buying the home and the land it resides on entails higher upfront fees.
- All upkeep and repairs, which might be expensive, are your responsibility.
- Freehold residences are often not near community amenities, so you would have to take care of them yourself.
Which One to Choose?
Your specific choices and circumstances will ultimately determine whether you pick a leasehold or a freehold. A leasehold home could be the right choice for you if you’re searching for a home in a neighborhood with shared facilities and are prepared to pay ground rent and service fees. But, a freehold property may be better suited if you desire to have total control over the property and do not want to pay any additional fees.
In summary, the main differences between leasehold and freehold properties are ownership, control, and additional costs. Both types of properties have their advantages and disadvantages, and the decision ultimately comes down to your individual circumstances and preferences. It’s always best to seek professional advice before making any significant property purchase decisions.