If you’re new to the property market, learning the lingo is
essential. There are lots of legal and financial terms you need to get your
head around and lots of research to be done.
Two terms that you need to be familiar with are ‘freehold’ and
‘leasehold’.
This quick read explains what each one means and why they are
important.
What is a freehold property?
When you buy a freehold property, you’re buying the property and
the land it has been built on. It usually refers to houses*.
You are the ‘forever’ owner of the freehold title until you sell
it on to someone else.
*Note: Some houses can be leasehold if you buy under shared
ownership. Also, when purchasing new-build houses, be sure to double-check the
title status.
What is a leasehold property?
When you buy a leasehold property, you’re purchasing the
property but NOT the land it has been built on. This is most common with flats.
Usually, another party owns the freehold of the building, and you will ‘lease’
the flat from them.
A leasehold is time-sensitive. So, if you buy a property with a
100-year lease, at the end of that time, the ownership goes back to the
freeholder.
Why are these terms so important?
Freehold and leasehold titles are important as they affect
ownership and your legal obligations. For example, if you have a leasehold flat
in a freehold building and there’s a problem with the exterior of the building,
it is usually down to the freeholder to fix it, not you as the leaseholder.
If you buy a freehold house and there’s a problem, you are
responsible for it.
Differences between freehold and leasehold
A freehold property is often more expensive than a leasehold as
you’re buying the land and building. With a freehold property, you have
complete control, so you can change things like windows or apply for
extensions.
Leasehold properties often come with extra fees, such as ground
rent or service charges (payments you make to the freeholder for the upkeep of
the building). Also, if you want to make changes to the property (like new
windows or knocking down a wall), you must apply to the freeholder first.
What’s a short lease?
During a property search, you might find a flat that’s priced
under market value because it has a short lease. While you think you’re saving
money, be warned that you might have to pay for a lease renewal that can cost
thousands of pounds. Also, many mortgage companies won’t lend on a property
with a short lease.
What’s a flying freehold?
A flying freehold is when part of a property hangs over or lies
beneath another party’s property. It’s normally a tiny percentage of the
property, such as a balcony protruding over someone else’s garden or a basement
that extends underneath a neighbour’s property.
In most cases, property owners don’t even realise they have a
flying freehold unless the issue of renovation or sale arises – then, it may
become a point of legal contention. Always speak to an expert about flying
freeholds.
Property jargon can be confusing, but don’t worry, our team
at Ridgewater Sales and Lettings are always happy to explain
things. Get in touch today if you’re selling or searching for a property.