Freehold is where someone owns the property and the land it sits on, compared to leasehold whereby you do not own the land it is built on. Therefore, the leaseholder will ‘rent’ the property from the freeholder for a number of years, which could be centuries. So, when buying a property, check if it is Freehold or Leasehold. However, it must be noted that you are basically a tenant, with the freeholder being a landlord in the eyes of the law for that period of time. Even though you can buy and sell the property, if it is a leasehold property you will technically never own it. When purchasing a leasehold property, make sure you look at the amount of years of the lease length, on average they are around 125 years, with some going up to 999 years. It would be advisable that any lease under 80 years could be difficult as it could create difficulties when mortgaging.
Usually flats are leasehold properties, with the building company who built the block usually having the freehold, if they haven’t sold it on to another firm. This is not always the way, and some flats like houses which have been converted into flats, are given out as freehold but the buyer must share this with the others in the whole property, which is known as ‘share of freehold’.
It is important than when purchasing a property, you are fully aware of the clauses of a freehold or leasehold as over the last few years there has been some issues with over 12,000 leaseholders facing ground rent charges, which usually every ten years double in price, however it can be more frequently.
Further on to this, on both freehold and leasehold, you must pay Stamp duty, however at the moment, there is a stamp duty holiday on properties under £500,000 with those only paying a percentage on the overage, saving £15,000.