by Ann Leaver, Director based at our Shepherd's Bush office.
When buying property it is vital to understand the difference between a leasehold, freehold and a share of freehold property.
Freehold Property
When you purchase a freehold property, you own the home, the land it is built on, and you will have the right to live there for as long as you please. Houses are most often freehold properties. Flats on the other hand, are more commonly leasehold or share of freehold.
If you own the freehold you can make changes to the property provided that you have the relevant planning permissions. Particularly with listed buildings (old buildings) you may need special permission to make structural changes.
Leasehold Property
When you purchase a leasehold property you are actually buying the rights to live in a property for a set period of time. You do not actually own the property, nor the land on which it is built. Most flats are leasehold. As part of the terms of the lease, it means you are obligated to pay ground rent to the freeholder. The ground rent and/or the service charge will cover the costs for communal maintenance repairs. The lease should stipulate how the service charge is worked out, and how it is divided between the other leaseholders. It’s important to calculate all these costs before committing to a leasehold property, as you may not have budgeted for the additional costs. Your estate agent should provide these details or they can also be found in the Home Information Pack (HIP).
Once the stipulated period in the lease expires, the ownership of the property is given back to the Freeholder. Most leases are initially set for a 99 year period. If the lease period is quite short, you can get an extension. For more information about lease extensions, click here to see Northfields free Guide to Lease Extensions. When buying or selling a leasehold property, it is important to find out how long the lease is, as it will affect the value of the property. If you are thinking of selling your property and need advice about how your lease will affect the value, click here to request your free valuation.
So why do people buy leasehold properties? Well, because most flats are leasehold, these properties are more affordable. Plus, it means everyone living within the same building has to split maintenance costs in respect of the common parts of the building and the communal areas. For that reason, if you have less time and inclination to look after outdoor spaces, a leasehold property with communal gardens may be a tremendous advantage.
Share of Freehold
Another possible type of property title on a flat is Share of Freehold. In this case, the title (i.e. ownership of the flat) will be leasehold and, in addition, you would own a share of the freehold title to the whole building. This way, you and your neighbours would jointly be the freeholder, with hopefully the same desire to look after the common parts of the building.
There are two main ways in which shared ownership of the freehold can be set up. The first, where a house has been converted into, say, two flats, is for the two flat owners to buy the freehold in their personal names and then whenever either flat is sold, they both have to transfer the title to the continuing owner and the new owner.
The more common method is for the freehold to be owned by a limited company in which each flat owner has a share. When a flat is sold, their share is transferred to the new flat owner, and a new share certificate is issued. If you would like to know more about how the title on your property would affect the value of your property, click here to request your free valuation. If you have any question about property titles call Ann Leaver on 0208 740 8833.
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