20 February 2025
AMD’s Laura Wilkinson, Director and Head of residential property explains the differences between leasehold and freehold properties
When considering purchasing a property it is useful to know some of the differences in property ownership in England and Wales. AMD Solicitors’ Laura Wilkinson discusses some of these differences.
FREEHOLD
Freehold ownership means that you own the property and the land the property stands upon and is commonly seen in houses.
Freeholders have:-
- Greater freedom over the use, improvement and additions to their property subject only to restrictions contained in the title deeds or matters governed by legislation, planning or Building Regulation rules.
- Sole responsibility for maintaining their home and external grounds.
- Freedom to sell their property without seeking permission.
LEASEHOLD
Leasehold ownership is governed by the terms of the property’s Lease. An owner of a leasehold property (the “leaseholder”, “lessee” or “tenant”) will own the right to live in the property for a set number of years subject to conditions in the Lease.
The building and land it stands on will be owned by the “freeholder” or “landlord”. Flats and maisonettes are sold as leasehold, houses can also be sold as leasehold.
Lease Term
The Lease will have been granted for a fixed term for example 999, 125 or 99 years. The Lease and its remaining term will be passed on each time the property is sold, the remaining length of the term reduces as time passes.
Leaseholders should be aware that mortgage lenders may not lend where 80 years or less remain on the Lease. It is possible to extend the term by statutory right or negotiation with the landlord, however, there could be significant cost in doing so, these costs will increase significantly once the term falls below 80 years.
Ground Rent
The Lease usually requires a leaseholder to pay ground rent to the landlord which may be a nominal sum of no financial value, or may be more significant, especially if the Lease provides for periodical increases. If the ground rent rises significantly, the amount could become unaffordable and you may have more difficulty selling or mortgaging the property in future. The Leasehold Reform (Ground Rent) Act 2022 was introduced to restrict the overcharging of ground rent in new or replacement long leases but this does not affect existing leases.
Service Charges
The costs of maintaining and insuring the building will be arranged by the landlord or management company and are passed on to all leaseholders by way of “service charges”. The amount payable varies depending on the services provided and works required in any given year. There may be other charges collected for example a reserve or sinking fund for major projects.
Restrictions and Obligations
Leases may contain restrictions or obligations which limit the use of the property including:-
- A requirement for landlord consent to certain activities or actions (e.g. having pets, hanging washing over your balcony, installing external aerials, removing carpets, subletting or selling the property).
- A requirement to seek permission from the landlord for certain internal alterations to the property. Consent should not be unreasonably refused unless the terms of the Lease specifically prohibit you from the proposed alteration. This is in addition to compliance with legislation, planning and Building Regulation rules.
- Obligations to not do anything that would cause a nuisance to the building’s other property owners.
It is important to comply with restrictions or obligation as the landlord may be entitled to take legal action if you do not.
Conclusion
Whatever type of property you are buying, you should make sure that you understand your obligations as owner. If you would like advice or assistance with any property matters please call on 0117 973 5647, email info@amdsolicitors.com or drop in to one of our four Bristol offices.
