Buying leasehold vs freehold Buying a freehold property
Freehold properties explained
If you own a property on a freehold basis, you own the property and the lands that it stands on.
With a freehold property, it is part of your estate and can be passed on to your heirs when you die. The only potential limitations are to do with planning and other laws.
Are freehold properties worth more?
Freehold properties, or flats with a share of the freehold, are usually more desirable than leasehold properties and tend to be worth more.
A potential downside is that any necessary repairs are up to you to organise, but it's down to you whether you want to carry them out or not.
Buying the freehold on your home
Owning a property on leasehold basis can be less advantageous for homeowners, so you may want to consider buying your property's freehold.
Buying a share of the freehold, or 'collective enfranchisement' as it's known, is the ultimate example of leaseholders acting together, in this instance to own the property outright.
Buying the freehold involves serving a Section 13 Notice on the freeholder and requires that 50% or more of owners agree to participate in the acquisition of the freehold. Once the freehold has been purchased the lease can fairly easily be extended to 999 years.
What problems could you face buying the freehold?
There are some barriers that could get in the way of leaseholders going down the collective enfranchisement route. As well as the cost of purchasing the freehold, which can be high, there is the need to create a new company that has directors willing to put in the work and effort to manage its affairs.
If only half the owners in a block want to participate, then the cost to each leaseholder will effectively double compared with the cost of a plan that manages to attract participation from 100% of owners.
Advantages of owning the freehold
There are clear advantages of owning the freehold of your property compared to a leasehold arrangement:
- The lease that you own lasts for a fixed number of years. Once the lease term is at an end possession of the property passes back to the freeholder, so as more of the term expires the property becomes less valuable. You don't face this problem with freehold.
- Freehold properties aren't subject to the various charges that a landlord can apply, which tend to be difficult to challenge.
- In fact, homeowners don't have to deal with a landlord at all as they are the freeholder and have overall responsibility for the property (or their share of the property).
Need mortgage advice?
We believe you should seek independent mortgage advice before taking out a mortgage. The Which? Group offers an independent mortgage advice service, Which? Mortgage Advisers, that looks at every mortgage from every available lender. You can also find an independent mortgage adviser using the Unbiased website.