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A freehold property is one where the owner has an absolute title to the land. In other words, the owner has full ownership of the property and can do as they please with it.
A leasehold property, on the other hand, is one where the owner holds a lease from a landlord. The lease terms will dictate what the owner can and can't do with the property.
For example, a residential lease might give the tenant the right to live in the property for a certain number of years but restrict them from making any major changes to it. When the lease expires, ownership of the property will revert to the landlord.
The Pros of Owning a Freehold Property
A freehold property is a piece of real estate that you own outright. Meaning that you have full ownership of the land and all the buildings on it, and you can do whatever you like with the property within the bounds of local planning regulations.
There are several benefits to owning a freehold property. Firstly, it gives you complete control over your home, so you won't have to worry about your landlord increasing your rent or selling the property from under you.
Freehold property is also a good investment; as well as being able to live in your own home, you can rent out part or all of the property or even sell it later for a profit.
Finally, owning your own home gives you a sense of stability and security that can be hard to find when renting. If you're considering buying a property, then a freehold property could be the best option for you.
The Cons of Owning a Freehold Property
While freehold property ownership may seem ideal, there are a few potential drawbacks to consider.
A freehold property can be expensive, particularly if major repairs are needed. That is because you are responsible for all repairs and maintenance as the owner of a freehold property.
If you decide to sell your freehold property, you may have difficulty finding a buyer willing to pay the same price you paid for the property.
Freehold property is generally more expensive than leasehold property because the owner has ownership of the land and the physical structure.
The Pros of Owning a Leasehold Property
As a leasehold property owner, you can rent out your property to tenants on a short-term or long-term basis. This generates income for you, which can be used towards other expenses such as paying off a mortgage or reinvesting in the property.
Leasehold properties also benefit from having a management company in place to take care of maintenance issues by way of service charge. This means you as the leaseholder, do not have to get involved with the organising of repairs or maintenance.
The Cons of Owning a Leasehold Property
The length of the leasehold property lease will typically be between 99 and 999 years, after which the property will revert to the freeholder if no extension has been actioned.
There are disadvantages associated with owning a leasehold property. Firstly, the property's value is likely to decrease as the length of the lease decreases. When a lease falls below 75 years, it isn't easy to sell the property or refinance your mortgage.
With the leasehold property, you may be liable for major repairs and renovations and any improvements made by the freeholder.
You must pay Ground Rent, Service Charges, and Insurance premiums with leasehold property, which can add up to a significant amount of money. Hence this is why it’s important to ensure your solicitor does their due diligence on the service charge records to ensure maintenance and repairs are done fairly.
Freehold vs. Leasehold – Which One Is Right for You
Regarding property ownership, there are two main options: freehold and leasehold. So, which option is right for you?
It ultimately depends on your circumstances and what you're looking for in a property. If you're looking for complete control and the ability to make changes to your home, then freehold ownership may be the better option. However, if you're looking for a more affordable option with fewer responsibilities, then leasehold ownership could be the way to go.
