Which property is right for you?
As a first time buyer, choosing whether to purchase a leasehold or freehold property is one of those big decisions. But what’s the difference between them? What are the pros and cons for each? Let’s break it down.
For a start, freehold properties are often more expensive at the outset than leasehold properties. Freehold usually applies more to houses than it does to flats, so as a result, they are naturally a bit more expensive, but that aside there is a premium for having greater control over your property which a freehold gives you.
If your primary concern is the initial cost of buying a home, leasehold could be a good option, but there are still plenty of things to look out for. Leasehold buildings often come with service charges, ground rents and admin fees, for example. These additional fees can be sold to third parties, too, so check your agreement to make sure you won’t be hit in the future by a hike in prices.
What you can control
Freehold properties give you more or less total control over what you can do to your home within the planning and building regulations. Leasehold properties are more restricted, so while you can usually decorate your property and install cosmetic and practical additions such as shelves and appliances, you might not be able to make structural changes or have pets in the property.
When can you sell?
You can sell a freehold property whenever you like. Remember, you’ve got control over your own destiny with a freehold home. When it comes to leasehold, things become a bit more complicated. Before selling, you will need to ensure that you have complied with all of the landlord (freeholder) obligations.
Additionally, the shorter the lease becomes, the more the value of the property will drop. Selling a property with a short lease can be difficult. Of course, you can apply to extend the lease, giving yourself a bit more time and increasing the property’s value, but this can cost upwards of 20% of the property value and be a gruelling process. Sometimes the cost of renewing the lease won’t offset the value of the sale by enough, so you might be out of pocket anyway.
Leases over 100 years generally keep their value well, but as you start to get below 80 years on the lease, you can start seeing problems. Some leases are up to 999 years, so these are the ones you especially don’t need to worry about!
Who is responsible for what?
If you need a new roof on your freehold property, that’s your responsibility alone, and it can be quite expensive. If a leasehold property such as a block of flats needs a new roof, leaseholders are often expected to pay an equal share of the cost to the freeholder (the owner of the property as a whole, in this case). This can mean leaseholders pay less for similar repair and maintenance works than freeholders do, but it can be a small advantage.
Do leasehold properties come with perks?
There are some perks that can come with leasehold properties. These can include on-site gyms, communal areas and concierge services. These extras aren’t free; you’ll still be paying for them as part of your service charge. City dwellers have come to expect these kinds of extras with their properties.
What about new builds?
There are many tales of families buying a property they thought was freehold, only to find out later that it is actually leasehold. A good lawyer will always check the legal title of the property to see who truly owns the freehold and if there are any restrictions to it, for example, if it can be sold on and if there are any limits on how much you can be charged. New developments can sometimes charge ground rents per property to manage communal spaces by hiring gardeners and landscapers.
So there you have it, some of the main differences between freehold and leasehold properties. If you’re still unsure what’s right for you or just want to learn more about the process as a whole, get in touch with us today. We’d love to help.