There are 2 primary kinds of homeownership in the UK; freehold and leasehold. If you are aiming to purchase a home or a flat, it is important to understand the distinction, specifically if the residential or commercial property remains in London where over a 3rd of all homes are leasehold residential or commercial properties.

Whether you're purchasing a removed home around Wandsworth, Wimbledon Village or South Wimbledon, or a home in Battersea or Putney, you need to understand exactly what kind of ownership you're buying.

What is the difference in between freehold and leasehold? In this article, we'll break down the terminology and cover a few of the things you ought to look out for if you are buying a leasehold residential or commercial property. We'll likewise share necessary facts on the new Leasehold and Freehold Reform Act, which is set to change particular leasehold guidelines - check out on for all the information.

What Is A Freehold?

Purchasing a freehold residential or commercial property provides the buyer sole ownership of both the structure and the land it rests on.

Most homes we sell in Wimbledon, Wimbledon Village, Coombe Hill, Kingston Hill and somewhere else in South West London are freehold residential or commercial properties.

Benefits Of Freehold

Owners of freehold homes can make any changes they want to the residential or commercial property - as long as they adhere to planning guidelines or, if needed, acquire Listing Building Consent.

There are no ground rent or service fee to pay, no time limit on your ownership of the residential or commercial property, and freeholders are not reliant on anybody else to preserve the building.

What Is A Leasehold?

With a leasehold, the buyer owns the residential or commercial property for the duration defined in the lease agreement. When the lease ends, ownership reverts to the freeholder. The lease agreement will specify the variety of years left on the lease.

Although leaseholders own the residential or commercial property's internal area, fittings, flooring and walls, they do not own the land the flat rests on or the material of the structure, including the roof and external walls. As an outcome, leaseholders require approval from the freeholder to make alterations or include an extension.

Most flats and houses are offered as leaseholds.

The Impact Of The Leasehold And Freehold Reform Act

On 24th May 2024, the Leasehold and Freehold Reform Act 2024 became law in England and Wales as part of the 'rinse' ahead of the general election. The majority of the procedures are yet to be presented, however crucial changes to be aware of include:

Redress schemes - freeholders must sign up with one, and can be challenged if they fail in their responsibility to the leaseholder.
Building management - it will end up being simpler for leaseholders to assume management.
New lease purchase and extension requirements - more leaseholders will certify for the right to buy or extend their lease.
Longer lease extensions - increasing from a basic 90 years for flats and 50 for houses, up to 990 throughout the board.
Ban on brand-new leasehold houses - under the modifications, brand-new homes need to be sold on a freehold basis in many cases.

Some mooted changes were dropped as the bill gone through your house of Lords, though they might still pave the method for future changes. You can discover further details in the UK government's Leasehold and Freehold Reform Bill explanatory notes, available on gov.uk.

What To Consider When Buying A Leasehold Residential Or Commercial Property

Leasehold residential or commercial properties are a typical kind of ownership, so there is no need to postpone a purchase. However, there are some things you need to remember.

1 Length Of The Lease

Lease length can vary substantially, so this is the first question you should inquire about the residential or commercial property before deciding if it's the one for you.

A flat's initial lease period is most likely to be an extended period - typically 99 years or 125 years and can be as high as 999 years. As time passes, the period staying on the lease reduces, so older residential or commercial properties might have much shorter leases.

Ownership of a leasehold home will go back to the freeholder once the lease goes out. Leases with 80 years or fewer are thought about short. Anyone purchasing a flat with a brief lease will find it more difficult to get a mortgage.

If you've set your heart on a flat with a short lease, you should not write it off totally. Government reforms announced in 2021 make it less expensive and more available for leaseholders to obtain lease extensions, while the Leasehold and Freehold Reform Act ought to make the process even simpler. You can also make it a condition of sale that the suppliers start the process of extending the lease before you take on the residential or commercial property.

2 Extending The Lease

Most leaseholders obtain a lease extension long before it reaches absolutely no years. Extending a lease can be an intricate legal process - though the Leasehold and Freehold Reform Act aims to streamline it. The expense is decided by negotiation between the leaseholder and the freeholder and depends upon the residential or commercial property's worth.

Previously, different types of residential or commercial property (flat or home) have actually benefitted from various basic extension lengths. However, brand-new government legislation offers the leaseholder the right to extend their lease by as much as 990 years. The reforms include set calculation rates to guarantee lease extensions are fairer, less expensive and more transparent.

Find out more about the costs and process of how to extend your lease.

3 Leasehold Service Charges

To cover the costs of keeping the structure's structure and the advancement's common areas, the landlord or managing agent will enforce a service charge.

While charges differ depending on the size of the advancement, some service fee consist of contributions to a reserve or sinking fund that is used to cover large one-off bills.

4 Ground Rent

Ground lease is a charge payable to the proprietor every year or half-yearly. While it is typically a token payment in the region of ₤ 200 or ₤ 300 a year, some landlords can charge countless pounds each year.

Beware that the landlords of numerous new-build developments have actually been placing provisions into the leases, permitting for significant boosts in ground rent. However, the brand-new Leasehold and Freehold Reform Act may result in a peppercorn rent in future.

5 Management Disputes

It prevails for conflicts in between leaseholders and freeholders to emerge. The most typical grievance is that the freeholder does not preserve the structure to a sufficiently high requirement and overcharges for service charges and ground lease. The 2024 legislation aims to make charging structures more transparent, however this will take time to come into impact.

Before purchasing a leasehold residential or commercial property, search for out as much as possible about the handling agents by speaking with the existing residents or searching on the internet.

What Is The Price Difference Of A Freehold Vs Leasehold

In South West London, the price of a freehold residential or commercial property tends to have a higher worth than leasehold residential or commercial properties. However, many houses with long leases in some cases have a cost range comparable to freehold residential or commercial properties.

The range in price depends on numerous aspects, from the location to the residential or commercial property size. You may not be comparing like with like, so when you purchase or offer a home, consider - is my residential or commercial property freehold or leasehold? If it's leasehold, the number of years are left on the lease?

Whilst the price difference in between long leasehold and freehold might not be considerable, the difference between brief leasehold vs freehold can be remarkable. You would just own the residential or commercial property for a limited timeframe and need to think about the costs of a lease extension.

Can I Buy The Freehold Of A Leasehold Residential or commercial property?

A leaseholder can purchase a share of the freehold together with the other homeowners of the house block. However, the procedure can be complex and costly.

You'll have to fulfill the regards to the Leasehold Reform Act 1967, such as holding the lease for the entire residential or commercial property for a minimum of 2 years. Seeking independent legal and financial suggestions is strongly suggested.

How Much Does It Cost To Buy A Freehold?

The expense of buying a freehold differs, though it's in some cases comparable to an 80-90 year lease extension. The cost needs to be concurred by both parties, or settled individually at a tribunal.

Account for the expenses connected to buying a freehold as well, consisting of:

- Land pc registry costs
Stamp Duty
- Your legal fees and evaluation charges
- The freeholder's legal charges and evaluation costs

Though under the new legislation, leaseholders might no longer be obliged to cover the freeholder's legal costs in every circumstance.

What Is A Flying Freehold?

Flying freeholds cover residential or commercial properties that overlap land owned by somebody else. Some mortgage companies do not lend for flying freeholds, so ask questions before taking your application even more.

You may come across a flying freehold on residential or commercial properties that:

- Cross a shared passage
- Are maisonettes or homes where areas are owned under different freeholds
- Have a terrace over another residential or commercial property
- Include basements or cellars below a neighbouring residential or commercial property

Should I Buy a Leasehold House?

Based upon your situations, you can decide if the price difference between freehold and leasehold represents a great deal. Seek suggestions, and think about the residential or commercial property alongside the more comprehensive advantages and disadvantages.

Freehold Properties: Pros And Cons

Here are some advantages and disadvantages of a freehold residential or commercial property to consider:

- You would own the residential or commercial property and the land
- You have control of the residential or commercial property
- You have ownership till you offer
- There are no service fee or ground rent
- The residential or commercial property value won't decrease due to the lease length

- Generally, more expensive to acquire
- You are accountable for all the costs of owning residential or commercial property, consisting of structure insurance, maintenance and improvements.

Leasehold Properties: Pros And Cons

What are the pros and cons of a leasehold residential or commercial property? These favorable and unfavorable differences in freehold and leasehold are worth thinking about:

Pros

- Generally less expensive to buy
- You would not be accountable for the communal locations
- You would not require to keep the structure of the building

Cons

- The worth of the residential or commercial property will decrease as the lease length reduces
- If the lease length is short, it may be challenging to offer the residential or commercial property
- Permission might be needed before making modifications to the residential or commercial property
- There might be restrictions on how you can utilize the residential or commercial property
- You are accountable for associated costs, including ground lease and service fee.

It's necessary to discover the very best solution for you, by assessing your own personal and monetary circumstances, before choosing if a freehold or leasehold residential or commercial property is for you. Every lease is different, so check the lease terms to prevent any unanticipated costs.

Commonhold Properties

Commonhold is an alternative type of residential or commercial property ownership promoted by anti-leasehold advocates. The building and land are divided into systems (for instance, flats) and typical parts. There is a registered title with the Land Registry for each system and one for the common aspects.

Therefore, the flat owner will own the freehold of the unit, so there will be no time limitations, as there are with leasehold agreements. The freehold of the common parts is owned by a commonhold association that will manage the building's common areas. Unit owners have a right to be members of the commonhold association.

If you have any concerns about leasehold vs freehold residential or commercial properties, or if you are seeking to purchase, sell, rent or let a residential or commercial property in the Wimbledon location, contact us today.

Residential or commercial property Valuation?

Seeking to Sell or Let Your Residential or commercial property? Book Your Free Residential or commercial property Valuation with one of our professionals.