What is the difference between freehold and leasehold?

If you are buying or selling a property, you may be wondering, what is the difference between freehold and leasehold? If you are thinking of purchasing a leasehold home, you need to be aware of the rights and responsibilities you will have. We look at what the terms freehold and leasehold mean and what to look out for if you are dealing with a leasehold property. 

At Lockings Solicitors, we deal with freehold and leasehold conveyancing in Beverley, Hull, York and beyond. We have many years of experience and the expertise to deal effectively with straightforward right through to difficult and complex transactions. 

We know that if you are buying or selling a property, you will want to complete promptly, and we always do what we can to move matters forward and avoid delays. We make sure that you are updated as to the stage your transaction has reached and that we are available to speak to you as needed throughout your time with us. 

We hold the Law Society’s Conveyancing Quality accreditation in recognition of our expertise in delivering quality conveyancing advice, our risk management and the level of information we provide to clients relating to the conveyancing process. 

We offer a FREE initial chat so that you can ask us any questions you may have about owning freehold or leasehold property. Call us on 01482 300 200, email us at welcome@lockings.co.uk or fill in our Free Online Enquiry and we will call you back promptly. We have offices in Beverley, Hull and York and represent clients across the East Yorkshire and York area and beyond.  

Freehold and leasehold property explained 

If you own a freehold property, you own the whole of the building and the land it sits on. 

If you own a leasehold property, you have the right to occupy the premises for a set number of years. The length of time you are entitled to have the property is set out in a lease. The land on which the property sits will be owned by the freeholder, also referred to as the landlord. 

When you buy a leasehold property, you are buying the right to occupy the premises in accordance with the terms of the lease. You will be entitled to the term remaining on the lease. Leases can have different lengths. Commonly, this can be 999 years, 125 years or 99 years.  

The lease will contain a range of rights and responsibilities. These usually include: 

• The requirement to pay ground rent and service charges 

• An obligation on the part of the landlord to insure the building 

• The right to use common parts 

• Restrictive covenants, such as no noise after 10pm, no pets and no alterations without the landlord’s permission 

As the leaseholder of a property you will need to pay repeating (e.g. annually) charges to the landlord, known as service charges and ground rent. 

The money paid to the landlord for service charges will go towards: 

• Maintenance, repairs and upkeep of the building and the common parts 

• Utility bills for the common parts 

• A contribution to a sinking fund, which is a pot of money that will be available for any future large items of expenditure, such as a new roof 

• Buildings insurance 

• Management and administration fees 

The money paid to the landlord for ground rent (usually much less than service charges) is for the charge set by the lease or renting the land on which your home sits. 

Buying and selling a leasehold property 

If you ask us to represent you in purchasing a leasehold property, we will obtain a wide range of information from the seller’s solicitor, including: 

• A copy of the lease and plan of the property 

• A copy of the legal title to the property 

• A copy of the landlord’s legal title 

• Management company accounts 

• Confirmation that the seller’s service charge and ground rent payments have been paid up to date 

• A copy of the buildings insurance policy 

• Confirmation that the seller has not breached any of the restrictive covenants referred to in the lease or the legal title 

• Details of how much is held in the sinking fund and what large items of expenditure are foreseen 

We will go through all of the information with you and ensure that you have a clear picture of the rights and obligations you will be taking on. 

We can also discuss the length remaining on the lease with you. Once the term remaining falls towards 80 years, a property can lose value. While you have the right to extend a lease, it will be expensive to do this once the lease drops below 80 years. It is also the case that lenders can refuse to lend when the term remaining reaches around 80 years.  

If you are thinking of buying a property with a relatively short term remaining on the lease, we can talk about how you would go about extending the lease and the potential costs involved.  

If you are selling a leasehold property we act for you in supplying all the above to the purchaser’s solicitor and dealing with the questions they raise along the way. 

Who manages a leasehold property? 

A leasehold property needs to be properly managed. For example, the ground rent and service charges need to be collected, buildings insurance arranged, maintenance organised and annual accounts prepared.  

The landlord may deal with this themselves or pay a managing agent to do it. 

In some cases, the freehold may be owed by a management company comprised of the flat owners. This has several advantages, including the fact that leases can be extended without the need to pay a premium to a landlord. 

If the property is relatively small, such as a converted house with three or four flats, then it is usually the case that each flat owner will be a director of the management company and the flat management will be dealt with between you.  

Who owns the freehold of a leasehold property? 

The freehold may be owned by a single landlord, by a company or by the property developer. Developers sometimes sell freeholds on to specialist leasehold management companies. We will let you know who owns the freehold if you are buying a leasehold property and we will clarify it for you if you are selling a leasehold property and you are unsure.  

Can leaseholders take over the management of their property from the freeholder? 

Most leaseholders have the right to take over the management of their freehold. There is a strict process to follow and the leaseholders will need to meet certain qualifying conditions.  

Can leaseholders buy the freehold? 

Leaseholders usually have the right to purchase the freehold. This is also referred to as leasehold enfranchisement.  

The correct procedure needs to be followed in dealing with the landlord. Expenses include legal fees, the fees for a surveyor with leasehold purchase expertise, the landlord’s reasonable legal fees and the premium payable to the landlord for the freehold.  

At least half of the leaseholders in the block need to want to purchase the freehold. If there are only two flats, then both leaseholders must want to take part. A management company is often formed to carry out the purchase, with each participating flat putting forward a tenant as a company director. 

Leasehold houses 

While most leasehold properties are flats, a substantial number of new build homes have been sold on a leasehold basis. If you have owned your leasehold house for two years or more, you will usually have the right to buy the freehold. 

Again, it is crucial to follow the correct process in dealing with the landlord and taking up your right to buy. We can discuss this with you, including talking through the various steps and discussing how the freehold interest is valued. 

Contact our East Yorkshire and Yorl area freehold and leasehold property solicitors 

If you need help dealing with leasehold or freehold property, please give us a call.  

You can ring us for a FREE initial chat on 01482 300 200, email us at welcome@lockings.co.uk or fill in our Free Online Enquiry and we will call you back promptly. We have offices in Beverley, Hull and York and represent clients across the East Yorkshire and York area and beyond.