One of the most important things you need to know, if you’re buying a property in England or Wales, is whether it’s a freehold, a leasehold or a commonhold property.
It’s an important piece of information as it determines how the property is legally owned, which in turn affects your control and how much owning the place will cost you.
Here’s what you need to know.
Freehold
Freehold is the easiest type of ownership to explain as it means that you own both the property and the land it’s on.
Leasehold
Leasehold means that you own the inside of the property, with everything else, including the land, communal areas and sometimes even the windows, belonging to a freeholder or landlord. The “landlord” can be a company or institution and it owns the land for a predetermined period, usually between 99 and 999 years.
Leasehold properties are usually apartments, with very few houses being leasehold in England or Wales.
Freehold or leasehold?
There are several reasons why you need to know and understand whether your new property is freehold or leasehold:
With a freehold property, you control which repairs or maintenance you do to your property and land. Having a leasehold property means that the freeholder or their agent decides when to carry our repairs and how much they’ll cost you.
If you have a freehold property, you’re totally responsible for the costs of repairs and maintenance. Leaseholders pay only a proportion of the costs and don’t have to organise the work.
A leasehold property will have annual charges, such as ground rent and service charges, with the service charges often including buildings insurance and gardening. These charges vary from a few hundreds to a few thousands of pounds each year.
Buying and selling leasehold properties can sometimes take longer as there’s an additional leasehold contract to deal with and there may also be extra legal fees.
The remaining amount of lease can be an issue as any fewer than 80 or so years can reduce the value of the property or make it harder to sell.
Leasehold properties, especially flats, can be quite energy efficient – an EPC rating of C or better – although this isn’t guaranteed.
Changes on the horizon for leaseholders
The government recently made some changes so that leaseholders in England and Wales have a fairer deal.
From June 30 2022, new lease agreements (with retirement properties catching up in April 2023), ground rents have been set to zero.
Some leasehold properties, including Shared Ownership and Help to Buy properties, now have 999-year leases, getting rid of the worry about leases running out.
There also plans to:
– Cap the cost of a leasehold pack to just a few hundred pounds and make sure they’re delivered to buyers in no more than 15 days
– Make it easier to work out the cost of extending a lease or buying the freehold on a leasehold property
– Reduce the cost of extending a lease by abolishing so-called “marriage valuations”
– Make it easier for leaseholders to extend their leases and including the new zero ground rent and 999-year terms
Commonhold
Commonhold is another type of tenure that’s also being reformed by government.
This tenure offers new and existing flat owners the chance to buy the freehold of the property and own it with no time limit, rather than with a time limit.
Commonholders own and manage the property as a kind of collective. There may be joint management or an appointed management agent and commonholders are responsible for and in control of, the maintenance, repairs and costs
