When you buy a property, there are many considerations and costs you need to plan for. Whether the property is leasehold or freehold will affect what you plan on doing with the property. It can also affect any extra costs you may incur after purchasing the property.

Leasehold

When you buy a leasehold property, you can live and own the property for a fixed set of time, however, you will not own the land it stands on. The amount of time you own the home for will be specified on the lease. Leasehold properties in England, Northern Ireland and Wales, flats and apartments, are usually sold as leaseholds. However, in Scotland, only a small number of properties are sold as leaseholds. The buyer is known as a ‘leaseholder’.

Leasehold properties can have leases as long as 90 years, 120 years or even 999 years. When the lease expires, then ownership reverts back to the landowner unless you extend the lease. You can extend the lease after you have owned the property for two years at an additional fee.

As a leaseholder, you will pay fees to the landowner (for example, ground rent, service charges, or permission fees). The amount may increase over time. In addition to this, leaseholders will have to get permission from the landowner if they wish to make certain alterations to the property and may also have to adhere to other restrictions such as owning pets. If a leaseholder breaks the conditions of their lease, legal action could be filed against them and may risk losing their lease.

When purchasing a leasehold property, another consideration is how many years are left on the lease as you are carrying on the lease from the previous owner. If there is a short amount of time left on the lease (for example, less than 80 years), you may struggle to get a mortgage and may also struggle to sell the house. Therefore, the buyer needs to make sure that they will be able to extend the lease as well as afford the cost associated with extending the lease before buying the property.

Freehold

When you buy a freehold property, you own both the property and the land it sits on with no time limit. You will not need to pay any fees such as ground rent, service charges, or permission fees. However, freehold properties have their challenges such as the owner being wholly responsible for the maintenance of the property including repairs and property insurance.

In England, Northern Ireland and Wales, most freehold properties are houses. However, some new build homes have been sold as leasehold properties.

The owner has the right to use the property for any purpose as long as it adheres to local laws and regulations. You could use your property for business or sublet it  - which could be restricted on a leasehold property.

Freehold properties are usually more expensive than leasehold properties due to the benefits it brings. Freehold properties can be inherited through the generations and sold with no considerations of a secondary landowner.

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