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Leasehold or Freehold? Which one should I buy?

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This seems like complex legal language but it is extremely crucial to know the distinguishment of the different type of ownership, the difference in simplistic term is whether you will own your home outright or whether you will have a landlord.

Freehold title of the property means that you own your home outright, or as the land registry would referred to it as ‘title absolute’, this means that you own the land, building and even the air space above the property. This type of ownership is mostly desired, as you will not have a landlord, or any authority as such above you to tell you what you can and cannot do to your land. Having said that, there are sometimes still restrictions upon the land referred to as ‘covenants’, this will be discussed in my next article.

Leasehold properties on the other hand, means that you are not actually buying a building or a home, what you are buying is a lease. A lease is an agreement between the landlord (whom owns the land) and the new lessee, much like a tenancy agreement but this type of agreement is years rather than months. Most leasehold properties are 120, 999, 90 years, but they can go as low as 40 years. More information can be found on the Goverment website.

The trickiness with leaseholds is that below 70 years lease most mortgage lenders will not lend on it, and the other disadvantage is that as the years go by, the lease decreases so does the value of the property. Much too many people’s surprise even after buying a leasehold you will be liable to pay rent to the landlord, most rent fees for leaseholds are round about £35-100 per year.

So what is a Leasehold in physical form? A leasehold can be a house in certain circumstances, but in most cases it is a flat or an apartment. In those cases as well as the yearly rent, the lessee is also liable to pay maintenance charges for usage of electricity of common areas, or cleaning and gardening for common areas etc.

In conclusion, a Leasehold is a lot more complex and is a very different ownership to a freehold. Overall from many property experts’ view is that freeholds are more desired but Leaseholds in some circumstances are cheaper to buy and cost less to maintain even with the monthly maintenance charges. For more information on the buying home process visit our Love Your Postcode guide.

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