Freehold vs Leasehold – what is the difference?
Freehold and Leasehold are terms easily thrown around in the property space, but what do they really mean?
When buying or selling a property, it’s essential that you aren’t overwhelmed or confused by legal jargon, to ensure you fully understand the contracts that you are tying yourself into.
Understanding leasehold
A leasehold, then, is when you own a property for a set period of time, but not the land it is built on. You own the property under terms determined by the lease, which is the agreement with the Lessor who owns the freehold interest in the building.
Lessor – the person who owns the interest in the property out of which the Lease is granted
Lessee – The person who owns the property for a term of years under the Lease
What are the main differences between leasehold and freehold?
| Leasehold | Freehold |
| Lease involved – you are responsible to somebody above you who has a role in decision making | No lease involved – you are entitled to make decisions on your property without consultation with a lessor, subject to legal conditions and any rights of third parties |
| Maintenance & Insurance – in most Leases the Lessor is responsible for the maintenance and insurance of the building although they are entitled to claim the cost of this back from you via the service charge. | Maintenance and Insurance – you are solely responsible for the maintenance and insurance of your property. |
| Additional payments – with most Leasehold properties you will be subject to service charges and potentially ground rents. It is worth noting that any new Residential Lease granted now cannot contain a ground rent with a few exceptions. | Additional payments – while most Freehold properties will not come with any kind of rents or service charges, there are exceptions. It is fairly common for estates with private roads or communal areas to include service charges or rent charges. |
So is one better than the other?
In short, it depends on the circumstances and the specifics of your agreement.
All titles to property and Leases are different, so it is essential that you read thoroughly and ensure you completely understand the terms that you are committing to.
In the case of freehold, you may not have to consult a direct lessor or landlord when making decisions, but planning permission and national laws determining rights of way over your property could interfere with any plans for extension or renovation.
If you’re looking at entering a leasehold or freehold agreement, consult with a trained legal professional to make sure you are certain of your specific contractual terms. From here, you can make an informed decision on your property future.
Disclaimer: The information in this article does not constitute legal advice and is for general informational purposes only. Please contact a professional to obtain advice with respect to any particular legal matter.
