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Freehold and Leasehold Conveyancing

By: Liz Lennox - Updated: 18 Nov 2010 | comments*Discuss
 
Title freehold leasehold restrictive

When you are buying a house it is absolutely essential that you understand the true nature of the title you are purchasing. Essentially the terms 'Freehold' and 'Leasehold' refer to the type of 'estate'; which isn't just a word for Lord and Lady Buttersquashes' 40 acres by the river; it is the legal term for the rights you are getting.

There are two main types of title that most people are familiar with. Freehold and Leasehold. Each has its good and bad points and you need to make sure that you know the difference.

Freehold

When you buy freehold you will own the house and the land it comes with for as long as you want, freehold properties can be passed through the generations. You can generally do what you want to it, barring the requirements of local planning law. You may however need permission from the original developer if you want to make any structural changes, this will be contained in a 'Restrictive Covenant' and your Conveyancing Solicitor or Property Lawyer should make you aware of whom you need to contact.

Most houses are freehold, whereas most flats are leasehold. Some flats (including Maisonettes) can be freehold, just as some houses are leasehold. But this is rare. Recent changes in the law mean that there are more flats being sold with a freehold title but they are relatively few at the minute for you to worry about. Also, mortgage companies love freehold houses but are wary about freehold flats. So, be warned that if you are looking at a freehold flat you may have difficulty getting a mainstream lender to loan you the money!

Leasehold

If you buy a leasehold property, which will in most cases be a flat, then you are buying the right to remain in it for a set period of time. You will never own it or the land it stands on but you will have rights to cross the grounds to reach your front door. All of your rights to the property will be contained in the lease. The Lease term is usually around 99 years but it is not unheard of for it to be up to 999 years! When the lease comes to an end the property automatically reverts back to the landlord and a new lease will need to be negotiated, usually for a lot of money.

The lease will include all the obligations that you have including the requirement to pay ground rent and service charge.

Ground rent is a payment that is made to the Landlord to rent the ground the building stands on. Very often this will be a nominal amount, sometimes it can be a 'peppercorn', meaning that you pay absolutely nothing.

Service charge is the amount you must pay for your share of the maintenance of the building and 'common parts'. These are the areas that all flat-owners will use such as corridors, gardens and main entrances. The service charges must be reasonable. They can't, for instance, use it for the Christmas party or to buy the MD a new car! The lease should state exactly how much your share of the service charge should be and how it is calculated. This can be a substantial additional cost so make sure you budget for it!

You will never be able to make any structural changes to the flat and it is likely that you will be required to redecorate it at certain times. There will also be restrictions on what you can and can't do inside your new home. You may think this is grossly unfair but you will be living very close to other people and you don't want to not end up on 'Neighbours from Hell'.

There is the scope to buy the freehold but this can be an expensive business and will mean that you are responsible to maintain and run the whole block.

Now It's Up To You

You now have the basic information you need to decide whether you want to buy freehold or leasehold. Freehold gives you the scope in relation to alterations and personal freedom but Leasehold allows you to leave a large part of the general maintenance to other people. Also, Leasehold properties tend to be cheaper to buy but can be difficult to sell or mortgage, especially if the lease only has a few years left.

Finally, if you think you have found your perfect home, be it freehold or leasehold, it is essential that you read through the lease or title thoroughly to make sure you know exactly what you are getting.

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