News and Blogs

20 January 2021
Understanding leasehold vs freehold UK property purchases - what is the difference?

By Liam Parker, Senior Block Manager

Buying a property can be daunting. It’s sometimes a little bit confusing too!

If you’re weighing up home ownership, this simple Garness Jones Residential guide examines leasehold vs freehold UK property purchases – and the key things you need to know.

What does freehold mean?

If you buy a ‘freehold’ property, you own the building AND the land on which it sits.

Most houses are sold on a freehold basis and tend to include the land around the house (gardens), these are then all owned by you and your responsibility.

Some Freehold purchases may come with restrictive covenants if is sits on a private road or with shared gardens or parking areas. The coventants could limit you to what activity you can do in the shared gardens or what vehicles you can park in the car park and could also advise of liabilities you may have to pay towards upkeep and maintenance of shared areas or the private road and fixtures.

Some flats and apartments can be sold with a shared freehold as part of a management company.

What does leasehold mean?

Leasehold is generally less understood and means you own the property for the set period of time as defined in the terms of its lease.

In blocks of apartments and flats, you don’t own communal areas or the structure of the building. Maintenance of the building and structure is the freeholder’s or management companies responsibility, for which you pay service charges to cover your share of the costs of this.

There may also be ground rent which you pay to the freeholder.

Newly-created leases can range from 99 or 125 years right up to 999 years. The person (or entity) which owns the land, known as the freeholder, is the other party involved in the lease.

At the end of the lease ownership, the property technically transfers back to the freeholder, but in reality, this rarely happens as leaseholders can keep extending the term of their lease.

Extensions are a statutory right when you have been a leaseholder for two years or more however this does come with costs of legal fees and in most cases a premium to the freeholder to grant the new lease.

Selling a leasehold property is just like selling any other property. Things only change if your lease is short, in which case it might be hard to find a buyer.

At Garness Jones, we support many people who have leasehold properties in our Block Management work, managing developments in which there are many residents based within the same overall facility, all in their own leasehold flats and apartments.

How can you extend a lease?

If you’ve owned a property for two years or more, you have the right to extend its lease. Most leases are extended by 99 years.

Usually, it’s best to extend a lease as soon as possible because the shorter the term of the lease means its got more value to the freeholder and therefore the premium you pay will be higher.

Other costs usually include an independent property valuation, legal fees and Land Registry fees.

Leaseholder rights & management disputes

The rights of a leaseholder are protected by UK law to prevent the freeholder from taking advantage.

Leaseholders are entitled to:

  • Be consulted about any building work costing £250 or more per leasehold.
  • Be informed before any work is carried out that will take more than 12 months.
  • Be informed before work is done which will cost them more than £100 a year per leasehold.
  • See a summary of what their ‘service charge’ payments are spent on.
  • Examine how and why charges have been calculated (budget).

What can you do if you’re unhappy?

At Garness Jones Residential, our specialists have helped hundreds of leasehold property owners.

Some are unhappy at having to pay excessive service or maintenance charges. Others are upset with the way their property is managed or their funds are spent.

Usually, they live in a block of flats which is shared with other leaseholders. But some are homeowners on private developments overseen by management companies.

Thanks to the ‘Right to Manage’ regulations, we can help most leaseholders put an end to this misery – by ditching their management company.

How can you gain more control as a leaseholder?

Unhappy leaseholders have the right to act collectively and ask the freeholder to transfer its management to a ‘Right To Manage’ company.

Click here now for full details about the Right To Manage and how to assume these responsibilities!

To summarise, the two main options are:

1. Set up a management company with majority leaseholders to take over certain tasks from the landlord. You can then appoint your own agent. You can do this WITHOUT having to prove bad management.

2. Apply to appoint a new freehold manager. Bad management MUST be proven to do this, citing issues such as a breach of agreement or unfair costs.

Our property management specialists recently transformed residents' quality of life by doing this at a Hull apartment complex. Since our intervention, the communal areas have benefited from full redecoration, new carpets and new automatic LED lighting has been installed. The development now also has a positive cash balance and reserves.

If this is an avenue you’d like to explore, Garness Jones Residential can act on your behalf. We currently manage over 2,000 residential units in more than 100 complexes of apartments and houses across the Hull and East Yorkshire region.

In some circumstances, flat owners have worked together to buy the freehold of their block, giving residents direct control of building maintenance and the same security as freeholders.

If you feel unhappy with the way your block is managed, please email info@garnessjones.co.uk or call 01482 566057 for more information

Contact Us

Contact us or fill in the form and we'll get back to you.

Call: 01482 566057
Email: info@garnessjones.co.uk

Information

Get in Touch

We’re fully committed to handling personal information you’ve supplied to us in compliance with the latest GDPR laws, and we’ll never share your details. If you wish to unsubscribe, please click here to update your data preferences at any time.