Freehold versus Leasehold - is there one I should avoid?
There isn’t necessarily a way of owning a property that should be avoided however it’s important to understand the differences and implications of each.
There are three ways you can own a property:
1. Freehold, where the freeholder of the property (you) owns it outright including the land it's built on (often applicable to houses). You are responsible for maintaining your property and land, however you do not need to worry about your lease running out or consulting with others if you want or need to make a repair or change.
2. Leasehold, where you own the property and its land for the length of time on your lease agreement with the freeholder (often applicable to flats). If you buy a leasehold property you will need to factor in the service charge costs for the freeholder to maintain the building and the land it’s on. You will want to see a schedule of what will be covered and maintained. You will also need to look at the number of years remaining on the lease. The fewer number of years remaining the less desirable the property will be, however if you have fallen for a property with a short lease, all is not lost, you can investigate the costs of extending the lease. The estate agent and your solicitor will be able to help you with this. You will also need to assess any impacts the lease may have on your mortgage offer. If you are extending your lease you must take expert legal advice so as to ensure you don't prejudice your future sale of your property.
3. Share of freehold, where along with other freeholders (eg in a block of flats) you collectively own the freehold of the building and the land it’s on. As a collective you will have set up a company to manage the block or instructed a managing agent to do this on your behalf. Owning a share of freehold is advantageous as it will allow you to have more control over the costs you pay and decisions on your property. It also fairly easy to extend your lease up to 999 years
8th June 2015
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