Freehold vs Leasehold Is Worth Consideration

Checking whether a property is Freehold or Leasehold is often an afterthought for many home buyers weighting up a purchase

But this frequently overlooked consideration is worthy of attention for a number of reasons.
So what is the difference between the two? When you buy a freehold property, you own it outright - including the land on which it’s built – and you’re responsible for maintaining both the property and the land.  When you buy a leasehold property, you take over the lease from the previous owner and own the property and its land for the length of your lease agreement with the freeholder. When the lease ends, ownership returns to the freeholder (often known as the landlord) unless you are able to extend the lease.

The majority of leasehold properties are apartments, but there are also cases where houses are leasehold due to shared ownership schemes or shared rights (such as access or parking) with neighbouring properties. Not having to worry about the maintenance of the land is the only real advantage of a leasehold property.  The flipside of this is the likelihood that you’ll have to pay ground rent, services charges or any other landlord charges which are especially common with apartments.

If you’re thinking of buying a leasehold property, you need to examine two key factors: how many years are left on the lease and whether you have enough budget for any ongoing service charges and related costs. The length of the lease could affect your ability to secure a mortgage. Lenders normally require it to run for 25-30 years beyond the end of your mortgage, so if you’re seeking a 25-year mortgage the lease needs to have at least 50-55 years remaining.

As a result, in can also be difficult to sell a property if the lease is for less than 80 years, so you need to consider its length in terms of resale value too. If you’re buying a leasehold property, it’s worth imagining how long you intend to live there and how many years will be left on the lease by the time you move on.

That said, it’s also worth bearing in mind that you can ask the landlord/freeholder to extend the lease at any time. After you’ve owned your home for two years, you have the right to extend your lease by 90 years, provide you are a qualified tenant (generally speaking you are recognised as a qualified tenant if your original lease was for more than 21 years).

The landlord/freeholder will unusually charge for extending the lease and the cost will depend on the property. If you and the freeholder can’t agree on this cost, you can appeal to the Leasehold Valuation Tribunal. In that case, you might need the services of a solicitor and surveyor. It could become a costly exercise.

A freehold property takes all of these concerns out of the equation: owning the property outright means you don’t have to worry about the lease running out. If you’re considering buying an Orion home, you’ll be pleased to learn  that all of our current homes are freehold, including a range of semi-detached and mews properties at Mayfield Gardens in Wyke and a choice of detached houses at Leafield Gardens in Wrenthorpe and Benton Park in Horbury. Further details on all Orion Homes developments are available from Orion Homes’ head office on 01924 831030


Publish date: 02/03/2018