What is the difference between a freehold and a leasehold property?

Verifying if a property is freehold or leasehold, may not be at the forefront of a buyer’s mind. However, when purchasing an unoccupied property, it is always important to find out if the property is in fact a freehold or leasehold, as this could determine what you can and cannot do to the property.

So, what is the difference between a freehold and leasehold property?

Freehold

If you have purchased an unoccupied property that is freehold, it simply means the property owner (you), legally owns the property and the land the property sits on. As the owner of a freehold property, you are responsible for the maintenance and costs of the property and the land.

Owning a freehold property does mean that owners do not have to deal with:

  • Paying ground rent, maintenance fees or any other landlord fees
  • Engage with a freeholder / landlord
  • There is no lease time as you own the property and land outright
  • You can sell on your property as a freehold and the next owner will be the new freeholder

Leasehold

A leasehold means that you own the property (with possible terms and conditions on the leasehold) but do not own the land that the property is located on. Most apartments (including some houses) are usually sold as leaseholds. This means you own the property but not the building it is located in or the land.

Leaseholds have an expiry date, so you will only own the property for a certain period. Once the leasehold has expired it will return to the freehold owner unless you can extend the lease. Leasehold time scales usually run between 70 to 100 years, with some even as long as 999 years.

When purchasing a leasehold property, be sure to find out:

  • How much time is left on the lease? When the property is sold, it does not necessarily mean the lease will automatically renew. The lease begins when the freeholder (the owner of the leasehold) creates the lease.
  • Is there ground rent, service charges or landlord fees that have to be paid? And if so, how much and how often?
  • The length of the lease left on the property, could affect your mortgage, as generally a lease shorter than 70 years could be hard to mortgage / re-mortgage.
  • Is there any possibility to extend the lease?
  • Are there any restrictions in place from the freeholder that limit what you can and cannot do to or in the property? E.g., extensions, renovations, can you own a pet, can you sublet the property? You may need further permission from the freeholder for such requirements, with the possibility of fees being added on.

Whether the property you want to insure is leasehold or freehold, Guardcover Unoccupied Property can look to offer you some cover options that include:

  • Freehold owned in its entirety - We can offer buildings and contents cover.
  • Leasehold and legally responsible for insuring the buildings - Again, we can offer buildings and contents cover.
  • Freehold - But only for a part of the building (e.g. block of flats, maisonette etc.) – we can offer contents cover.
  • Leasehold and not legally responsible for insuring the buildings - We can offer contents cover.