Thinking of buying a new home? There’s plenty of things to think about, from location to number of bedrooms. But one thing you may not have considered is the difference between leasehold and freehold properties.
To help get you up to speed, this article will look at:
- What leasehold properties are
- How they’re different to freehold
- How to work out what’s right for you
What is a leasehold property?
While you’re browsing property sites, you’ll have likely seen the term 'leasehold' on a few listings.
Leasehold properties are pretty easy to get your head around. When you buy one, you own the building, but not the land it’s on. There are over 4 million leasehold homes in the UK. Usually, flats are sold as leasehold, but sometimes houses are too.
Since you don't own the land, you make a lease agreement with the landowner, hence the name. The lease can last from a few years up to 999 years. When the lease ends, the property ownership goes back to the landowner.
Laws around leaseholds are slightly different in Northern Ireland and Scotland. For Northern Ireland, you can find out more on Housing Rights. For Scotland, see Home Report Scotland.
How is a freehold different?
The other type of property on the market is freehold. A freehold home means you buy both the building and the land. So, you’ll own the house until you choose to sell it, and you won’t need to negotiate a lease with anyone.
Typically, houses will be freehold properties, but you may find some flats sold as freehold.
Is leasehold right for me?
Buying a property is a big deal, and the decision on leasehold vs freehold may well come down to your situation. If you’re buying a flat in a city, it’s likely it’ll be a leasehold property.
There are some benefits. Usually, a management company takes care of shared areas, so you won’t pay for repairs out of your pocket. The other side of this is that you’ll have to pay a monthly fee as part of your lease. The landowner usually insures the building, so you don’t have to. But it’s a good idea to get contents insurance to protect your belongings.
Another thing to keep in mind is the length of the lease. Try to avoid leases that have less than 80 years left, as it can be hard to sell or get a mortgage when the lease is short. You can extend the lease, but it may cost more as it gets closer to the end.
The government is working to make lease extensions easier and cheaper. Still, it’s best to find a property with at least a 99-year lease from the start.
Getting on the property ladder
Hopefully you now have a better understanding of what a leasehold is. There are plenty of benefits that come with this type of property, but the decision is ultimately down to you. At AXA we want you to feel safe in your home. So, if you’re looking at leasehold properties, why not take a look at our contents insurance. With brand new replacements1 for lost and stolen items, you can feel assured that we’ve got you covered.
1 Subject to a valid claim. Excess applies. Repair or cash may be offered. Terms and conditions apply.
