Leasehold versus Freehold

There are two main types of land ownership in the UK - leasehold and freehold.

Freehold

A freehold means that you own the property outright and forever. You cannot do exactly as you would like to it, as there are laws and other parties have an interest in it. However there is no point in time in which ownership reverts to anyone else.

Leasehold

Leasehold property  means you have a right to occupy a property for a specified period of time, after this property will revert to the freehold. This is not really a problem in the case of 999 year leases which are sometimes granted, but when leases get below 75 years it becomes more difficult to obtain a mortgage.

Leaseholder often have to pay  ground rent charges to be paid - this is a fee each year.  It is generally quite small.

Finally leases may have restrictions - such as ownership of pets or size of trees, etc.

Leasehold are common in flats as it helps to deal with problems regarding who will repair the roofs or common area. These issues becomes a matter for the freeholder. In return leaseholders have to pay management/service fees to their freeholder.

Right to extend a leasehold

Once the lease drops below about 80 years the resale value of a leasehold property will fall. Leasehold can extend their lease, and this requires negotiation with the freeholder.This is a complex area and requires a solicitor.

Share of Freehold

Freeholders in flats charge leaseholders for repairs and maintenance. As they are able to pass on these costs they may not have a strong incentive to find the cheapest suppliers or insurance, or they may not carry out repairs promptly. Leaseholders have legal protections and right to see details of invoices.

Another option is for more than half the leaseholders to get together and purchase the freehold. They can then either set up a company or run it as a group of trustees. Each individual flat owner is said to own a share of the freehold. This is a complex matter, especially with a lot of flat holders. It requires legal advise and can be expensive.