LEGAL
Leasehold vs Freehold – What’s the difference?
When purchasing a property it is important to understand the difference between freehold and leasehold.The difference can be confusing to a first time buyer. Coralie Phelan, Partner and Head of Resales and Staircasing at Prince Evans Solicitors, looks at the key differences between freehold and leasehold properties and what it means for you
SO WHAT WILL I OWN?
Obligations and Covenants Important restrictions to consider, which could affect your decision as to whether to purchase, are as follows: 9 Are you allowed to keep pets and if so is landlord’s consent required? 9 Are there restrictions on what you can do with your balcony? 9 What are the restrictions on use of the communal areas such as any communal gardens? 9 Can you erect a satellite dish? 9 What are the restrictions on making internal alterations? 9 Are you allowed to sub-let and, if so, under what circumstances? WHAT RIGHTS CAN I EXPECT TO BE INCLUDED IN THE LEASE? You would generally expect to be granted the following rights: 9 Access to the property 9 To quietly enjoy the property 9 Support and protection from adjacent property 9 Access to the adjacent property for the purposes of maintaining your own property
The crucial difference between freehold and leasehold is who owns the land the property sits on. If you purchase a house, generally this will be freehold, which means you own the house itself plus the land it sits on. If you purchase a flat, the property with be leasehold, which means you own the property “demised” (as set out in the lease) but not the land itself. However if you purchase a house under a shared ownership scheme this would be held on a leasehold basis until you own 100% of the property. WHAT IS A LEASE AND WHAT TERMS CAN I EXPECT TO HAVE TO COMPLY WITH? A lease is a deed or legal agreement, which tells you how many years you can live at the property. A lease can be a short-term or long-term agreement. Lease terms for flats or houses being purchased are generally 99, 125 or 250 years. It also contains rights granted for the benefit of the property. The deed also imposes obligations in relation to use of the property and reserves some rights for the landlord and other tenants. You would rent the property from the freeholder for a set period. At the end of that period if the lease is not extended the property is handed back to the freeholder. The freeholder/landlord could be a company, housing association, local authority or individual.
Leasehold You will own the property itself for
the term granted, this usually includes everything within the walls, the ceiling and floorboards but excludes the main structure and common parts which are owned by the freeholder. The freeholder is usually responsible for the maintenance of the structure and communal areas and you would contribute towards the cost of maintenance by way of service charges. If you own a leasehold house (as opposed to a flat), you would be responsible for the internal and external parts of the house including any garden and any drive. It does, however, depend on the terms of each individual lease as to what is included.You should always pay particular attention to the description of the property in the lease to ensure that the property is described accurately. Do also check that the lease includes rights to park or a garage, if you are expecting these to be included.You should also review the lease plan and check it is accurate. Freehold You own the property and the land it sits on. This carries with it responsibility for the upkeep and maintenance of the whole of the property and the land itself. WHAT ARE THE CRUCIAL LEASE TERMS I SHOULD BE AWARE OF? A lease is not an easy document to understand and it is imperative that you instruct a conveyancer who has experience with leasehold properties who can explain the terms of the lease in a way that is easy to understand. It is essential when purchasing a leasehold property that you take the time to read the entire lease along with your conveyancer’s summary of the key terms. There are several key lease clauses to be aware of, as follows:
9 A right to connect into services 9 A right to use any communal television aerial 9 Use of communal areas.
The lease will contain the landlord’s and possibly the management company’s obligations. These generally include a responsibility to maintain the communal areas, to insure the building and to enforce tenant’s covenants against other tenants at your request and cost. SO HOW IS THIS DIFFERENT FROM FREEHOLD? If you purchase a freehold property there is no lease document setting out rights and restrictions. Your rights come from general law and the title to the property. There
HOW IS THIS DIFFERENT FROM FREEHOLD?
If you own a freehold property you own the property and the land it sits on. It is possible that there might be some covenants that you have to comply with such as using the property for private use rather than business use or not erecting outbuildings, however, generally there are very few restrictions on the use or enjoyment of freehold properties as opposed to leasehold properties.
110 First Time Buyer February/March 2024
Made with FlippingBook - professional solution for displaying marketing and sales documents online