There are a few differences between a freehold property and a leasehold property. Having the wrong type of tenure on a property you are interested in taking a mortgage out on can have long-term negative consequences, so you need to make sure that you are working with solicitors that understands conveyancing and the nuances of any property deal. Without this you could become stuck with a freehold or leasehold, when the opposite was the correct tenure for your circumstances.
If you are the freeholder of a property you have the right to do with the land as you wish, as you own the property outright and the land that it is built on. Buying a freehold gives you the responsibility of maintaining your property and the surrounding land, something that should be added into any budgetary plans you are making. Most houses that are purchased are freehold, though you do sometimes find leasehold agreements with shared-ownership of property.
Owning the property ensures that you never have to worry about the lease on the building and land running out, you won’t have to deal with the landlord or pay the landlord for rent, service charges and other related bills. You’ll be in control.
Sharing a Freehold
It is possible to buy a freehold from your landlord with other tenants, in the instance of a landlord owning a block of apartments for example, and in the form of a Common Hold. You will require at least half of the tenants to agree to buy a share, and together it will give you as a group the control over your home and all associated costs, as well as being able to extend your lease for up to 999 years. It is also a requirement for the group of tenants to set up a company to manage the building upon successful completion of the acquisition.
The majority of apartments are owned leasehold, a situation where you own the property and its land for the length of the lease agreement with the freeholder (landlord). Upon the leasehold ending the ownership returns to the freeholder. When you buy a property under leasehold conditions you’ll take over the lease from the previous owner, so you should consider a few factors.
Firstly, how many years are left on the lease? This is important as you can then budget accordingly and put in place a relevant plan for applying for a mortgage and working out the resale value of the property. You can also accurately work out all resulting charges and costs, including service charges.
Length of Leasehold
If the property has a lease that is less than 70 years you may struggle to successfully apply for a mortgage on it, with most lenders looking for around 25-30 years lease after your mortgage has ended. This is an important factor to consider, especially if you are thinking of selling the property at some point in the future. You can ask your landlord to extend the lease at any time, and have the right to extend it by 90 years once you’ve owned your home for two years, and if you qualify.