The Basic Difference
The difference comes down to whether or not you own the land that the property sits on.
With freehold, you own both the property and the land subject to any mortgages or charges. This means that you are the freeholder.
But with a leasehold you only own the property that you are occupying, you do not own the land. In this instance the landlord is the freeholder and you are the leaseholder. This means that there is a lease between you and the landlord for a period of time that sets out the amount of ground rent payable, the things you can and cannot do and permissions you would have to seek to do things.
Freeholding clearly offers a greater level of ownership as you own the property subject to any mortgages you may have.
With a leasehold, however, you are required to pay a fee to the freeholder who will act as a landlord. The fee that you pay is called ground rent. If you have a mortgage, you will have to pay this as well as the ground rent. The term of the lease can vary. Although you may not reach the end of the lease term you are still able to sell the lease for the remaining years left on the lease.
With a freehold property you’ll be able to make any changes that you want provided that they comply with building regulations and you have obtained planning permission where necessary. You would also have to check whether the property is in a conversation area or is a listed building. If the property falls within one of those categories, you will be restricted on what you can do and would have to obtain third party consent.
With a leasehold, you’ll need to ask permission of the landlord to make any changes to the inside of the property. The lease will have specific terms to set out what you can and can’t do, and you will have to abide by that.
As a freeholder of the property, you have full responsibility for maintaining and insuring the property.
With the leasehold, along with the ground rent, you may also have to pay service charges to the landlord or managing agents. Service charges are paid to maintain the common areas that you share with other leaseholders. The landlord is responsible for the maintenance and insurance of the building in accordance with the terms of the lease.
Know your terms
As you can see, there are several differences between the two options. It’s important to be fully aware of the terms you are entering before signing any contract. If you need legal guidance, contact Bowsers Solicitors who will be able to help you with any query you may have.