Understanding Freehold Properties: A Comprehensive Guide

If you're considering purchasing a property in the near future, you've likely come across the terms 'freehold' and 'leasehold'. These legal terminologies, while might seem confusing at first, are essential to understand before you embark on your property buying journey.

This insight looks into the concept of freehold property ownership, exploring its advantages, potential complications, and how it compares to its counterpart, leasehold.

Key Takeaways

• Freehold ownership means you have full ownership of the property without any time restrictions or lease agreements, providing maximum control and long-term security.
• Benefits of freehold ownership include the ability to make changes without permission, stability without lease expiration, and potential financial gains as property values appreciate.
• Considerations of freehold ownership include increased responsibilities for maintenance and repairs, higher upfront purchase costs compared to leasehold, and limited access to shared amenities.
• Freehold properties can include various types such as detached houses, semi-detached houses, terraced houses, and commercial properties, and the buying process involves costs, the right of first refusal, and the option to manage the property.

What Is Freehold?

When you own a property on a freehold basis, it means you have full ownership of both the building and the land it sits on. You don't have any time restrictions or lease agreements with a landlord. It's like having complete control and ownership of your property.

Freehold property ownership provides a more comprehensive level of control compared to leasehold ownership. As a freeholder, you have the following advantages:

Absolute Ownership

Freehold ownership provides you with full and unrestricted rights over the property, allowing you to exercise complete control without seeking permission from external parties.

No Lease Expiry

Unlike leasehold properties that revert to the landlord at the end of the lease term, freehold properties do not have a fixed duration of ownership. This perpetual tenure grants you long-term security and stability.

No Ground Rent or Service Charges

Unlike leasehold properties, freehold ownership typically does not involve payment of ground rent or service charges to a freeholder. This translates to potentially lower costs over time.

Freehold vs. Leasehold

Understanding the difference between leasehold and freehold is essential when considering a property purchase. With a freehold property, you own both the building and the land it stands on indefinitely. You have complete control over the property, allowing you to make changes and renovations without seeking permission from anyone.

On the other hand, leasehold properties grant you the right to live in the property for a fixed period of time. You do not own the land or the building itself, but rather have a lease agreement with the freeholder. This means you may need to seek permission for certain alterations and renovations, and you may be subject to paying ground rent and service charges.

Freehold Property Types

Freehold ownership applies to various types of properties, ranging from residential to commercial. Common examples of freehold property types include:

Detached Houses

Detached houses that stand independently on their own land are often considered freehold properties. As the owner, you have exclusive rights over the building and the land it occupies.

Semi-Detached Houses

Semi-detached houses, which share a common wall with an adjoining property, can also be freehold. In this case, you would have sole ownership over your property and the associated land.

Terraced Houses

Terraced houses, arranged in a row with shared walls, can have both freehold and leasehold properties. It is essential to clarify the tenure status of a specific terraced house before making a purchase.

Commercial Properties

Commercial properties, such as office buildings, retail spaces, or industrial units, can also be held as freehold. This offers business owners greater control and flexibility over their premises.

Benefits and Considerations of Freehold

For all the benefits of freehold ownership, there are also disadvantages of buying freehold property. Be sure to consider all thoroughly before proceeding.

The Process of Buying a Freehold Property

If you're a leaseholder interested in buying the freehold of your property, here are some points to consider:

Cost

Purchasing the freehold on your property will come with a price tag. Additionally, legal and valuation fees, as well as stamp duty, may apply.

Right of First Refusal

If a landlord wants to sell the freehold of a property, they're typically required to offer the leaseholders the first chance to purchase it.

Right to Manage

Instead of buying the freehold, you might want to consider applying for the 'right to manage' your building. This can give you a say over the property's management and associated costs.

When you're ready to start the formal process of buying the freehold of your building, it's advisable to seek professional legal and valuation advice. Be prepared for negotiations, and remember that if an agreement can't be reached within certain time limits, either party can apply to the First Tier Tribunal, whose decision will be binding on both parties.

Share of Freehold Explained

There is a unique scenario where you might come across an option to buy a 'share of freehold', especially when purchasing a flat. This essentially means that the freehold ownership of the property is divided between the flat owners in the building. It's an attractive alternative to leasehold as it allows all owners to have a say over the property's maintenance decisions and limitations. However, it does come with increased responsibility and the need for regular discussions with the fellow freeholders.

Flying Freehold

A 'flying freehold' is a peculiar situation where you own the property, but it overhangs or underlies land that you don't own. This could be a room extending over a shared passageway, a balcony hovering above someone else's garden, or even a cellar extending under a neighbour's property.

While a flying freehold might seem complicated, it doesn't have to be a dealbreaker. However, it's crucial that your legal adviser is aware of this situation, as there might be limitations on carrying out repairs or renovations. Most mortgage lenders will accept a flying freehold as long as it forms only a minor part of the overall property.

The Concept of Freehold in Scotland

In Scotland, the majority of properties are freehold, known as 'feuhold'. There are very few leasehold properties in Scotland, and the process of buying a property in Scotland differs significantly from that in England, Wales, and Northern Ireland. If you're considering buying a property in Scotland, make sure you're well-versed with the Scottish conveyancing process.

Freehold Next Steps

When buying a house, it's important to understand the concept of freehold property ownership is crucial if you're planning to invest in property. Whether you're buying your first home or looking to expand your property portfolio, a thorough knowledge of freehold and leasehold properties will help you make an informed and confident decision.