Differences between free and leasehold.
What is the difference between freehold and leasehold, when buying a property? How will it affect me as a buyer?
Asked on Jul 5 2013,
General in Newcastle upon Tyne |
The difference in definition between freehold and leasehold is reasonably straightforward.
Freehold means that the buyer outright owns the property and land that it stands on, while leasehold means that they own the right to stay there without the threat of eviction and with a great many rights for a set number of years. This number of years is normally over 100 and even longer at times.
As a buyer, the only way it can affect you is if there is a particularly short period of time left on the lease when you buy it. Most mortgage companies will not give a loan on a leasehold shorter than 70 years, so if you are buying a home and looking to sell on it the future, it can be problematic if you have a leasehold likely to be shorter than this when the time comes to sell.
You can get around this by applying to the freeholder to extend the agreement however, at cost.
Answered on Jul 8 2013,
Freehold means that the buyer of the property owns both the property and the land that it stands on while leasehold however means that you do not own the land that your property is situated on and therefore are applicable to pay a ground rent which can change over the years.
We hope this helps.
Answered on Sep 20 2013,
I believe that when you buy a leasehold property you're only buying the right to live in the property for a period of time which is the period of the lease. If you don't extend the lease (or purchase the freehold) then the property goes back to the freeholder! I believe that flats/appartments are always leasehold, however as the owner and leaseholder of for example, the lower flat you may own the freehold on the upper flat. This is the norm with Tyneside Flats and Semi-detatched flats in Newcastle for the most part. These flats generally started off with 999 year leases, so less to worry about and the ground rent is often just a peppercorn. In "blocks" of appartments with shared areas such as stairs and hallways there is less likelihood that owners have any share of the freehold and ground rents will be higher and there will be service charges to cover the maintenance of the exteriior and shared parts, plus you have no control over the level of the service charges. A few years ago we purchased a new build off plan and this was a leasehold flat in a block of only 8 . At completion the builders handed over the management company to the owners, so we all had a say in what the maintennance charges should be also what work needed to be done. The builder still owned the freehold of the block though. Some of these flats may just have 99 year leases, and costs to extend the lease may cost a considerable amount,especially if the remaining time on the lease falls below 50 years. I'm taking about 1000s of punds, not hundreds. Normally most banks will not lend on a property that has less than around 70 years on the lease, so bear this in mind when buying, but also think about the future when you might want to sell and that purchaser is most likely to need a mortgage to buy it.
We didn't really understand the implicaitons of leasehold until last week when we offered on a leasehold house (which I had never heard of) We discovered that there was only 50 years on the lease,so it wasn't mortgageable. When we did our research we looked at cost to extend the lease and also to buy the freehold . Would have been around 30k! The property wasn't priced with this in mind IMO. The vendor is a mature single lady who's lived there for 30 years and doesn't seem to have a clue.It has huge implications for her selling the house (which has been on the market for 2 years) but even thought the estate agent seems to know there was only 50 years left on the lease she doesn't seem to have been advised to seek advice.
Interesting that leasehold flats often command higher prices per square foot than freehold houses. No one seems to value them as leasehold versus freehold.
Answered on Mar 18 2014,
Freehold -all your responsibility . Leasehold -not. eg roof falls in theirs or part depending the deal .
Answered on Aug 27 2014,
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