What Is Freehold Property?
When you buy property, you are soon submerged into the murky world that is property jargon.
And just like every other field, there is all sorts of jargon that you might not be sure of. Whether it is knowing what a surveyor does, what conveyancing is, what a title deed is, how to understand all the jargon in the mortgage terms and conditions and much more besides, there is a lot to learn.
One thing that you will see all the time but might not necessarily know about is with regard to freehold. This is usually contrasted to leasehold. When viewing the particulars of a property one of the key bullet points will let you know, on most occasions, whether it is a freehold or a leasehold property - and if not then it is certainly something you will want to ask.
But what, exactly, does the term freehold actually mean?
Essentially the distinction between the two is the difference between being the full ownership of the property or having a landlord. If you buy a freehold property, then it means that you will own the land and building on it forever, until you sell. This is therefore the option that most people would want when buying a property.
This is contrasted with leasehold, where you have a very different relationship to the property: in this instance you are buying a lease from the person who IS the freeholder, and that will enable you to use the home for a set number of years, as outlined when you buy. This is usually a long period of time, typically something like 90 years or so, but it can be shorter or longer. With a 90 year lease, you have the right to use the property for 90 years. So clearly the longer period the leasehold is for, the better. The leasehold can be extended, but this is not free!
When you have a leasehold, you will usually have fees to pay for maintenance, a service charge to cover repairs and so forth. A common complaint is that leaseholders often feel that the building isn't being maintained well enough and wondering where their money is going, or feeling that they are being charged too much with regard to their ground rent. They are not in total control in the way that a freeholder is.
Typically when purchasing a flat you will be getting a leasehold, whilst with a house you would usually get freehold property, although this is not always the case and you will always need to check carefully.
Another thing to be very careful of when being a leasehold is the length mentioned above - if the lease starts to get around the 80 year mark or less then the value of the property can fall a lot relative to the market as other people are wary of buying it; additionally many mortgage companies can be reluctant to offer a mortgage, or might simply refuse to do so, when the leasehold is comparatively short.
Because of the problems in a property with less than 80 years leasehold, it is quite common for people who are thinking of buying such a property to insist on the leaseholder extending that lease before considering buying it.
More first-time house buying articles:
- Where To Buy a House: Choosing a Location
- Why London Property Prices are so High
- How Many Houses Should I View?
- How To Save For a House When Renting
- Tips For Renting in London