When buying a home, understanding property ownership terms is crucial for any buyer. One of the most common terms you’ll come across is freehold. In this blog, we’ll explain what freehold means, how it differs from leasehold, and why it’s an important factor when purchasing a property in Preston.
Understanding Property Ownership
Definition of Property Ownership
Property ownership refers to the legal rights and responsibilities associated with owning a property, including the land it sits on. In the UK, there are two main types of property ownership: freehold and leasehold. Freehold home ownership means you own both the property and the land outright, giving you complete control and responsibility. On the other hand, leasehold property ownership means you own the property for a set period, often ranging from 99 to 999 years, but not the land it’s built on. This distinction is crucial as it affects your rights, responsibilities, and potential costs associated with the property.
1. Defining Freehold Ownership
Freehold is a term used to describe a type of property ownership. When you own a freehold property, you own both the property and the land it sits on, in perpetuity. This is the most straightforward form of property ownership.
Leasehold property, on the other hand, means that you own the property but not the land it is built on. Leasehold means owning a property without owning the land it is built on, which can impact future sales and ownership responsibilities.
Key Characteristics of Freehold Ownership
- Complete Control: As the freeholder, you have control over the property and land. You are responsible for its maintenance and any decisions regarding changes to the property. As the freeholder, you have more control over the property and land, allowing you to make decisions without needing permission from a landlord.
- No Ground Rent: Unlike leasehold properties, there is no ongoing ground rent to pay to a landlord.
- Long-Term Stability: Freehold ownership is typically more stable, as you own the land indefinitely, unlike leasehold, which can have an expiry date.
These types of homes are often seen as more desirable due to their permanent nature, making them more popular for families and long-term investors.
Flying Freehold
A flying freehold is a unique type of property ownership where part of the property overhangs or lies beneath another person’s property. Examples include balconies that extend over a neighbor’s land, basements that sit underneath another property, or passageways that run through a neighboring building. Flying freeholds can be more complex than standard freehold properties and often require special consideration from a conveyancing solicitor. This complexity arises because the ownership rights and responsibilities can overlap, necessitating clear agreements to avoid disputes.
2. Freehold vs Leasehold: Understanding the Difference
While freehold gives you full ownership, leasehold means you own the property for a set period (often 99 to 999 years), but the land it sits on is owned by a freeholder. Understanding the differences between freehold and leasehold properties is crucial. In Scotland, most properties are freehold and leaseholds are rare.
Key Differences - Freehold vs Leasehold
- Land Ownership: In a freehold, you own both the property and the land; in a leasehold, the land belongs to someone else (the freeholder). This can usually influence the process of getting planning permission if you are thinking of building on it.
- Costs: With leasehold properties, you may need to pay ground rent meaning you are practically a tenant for the surrounding land, service charges, and sometimes an annual rent for the land. Freeholders don’t pay these ongoing costs.
- Duration of Ownership: These last indefinitely, while leasehold properties can expire, and the leaseholder must negotiate an extension or renewal of the lease agreement to avoid losing ownership of the property. This is very popular in new build houses. Qualifying tenants have the right to extend their lease by 90 years for a flat, or 50 years for a house, after owning for two years.
Understanding the difference between these two types of ownership is essential when purchasing a property in Preston, as it directly impacts your rights and responsibilities and the purchase price of the house. It can also have an impact if you already own the home and are planning on remortgaging.
3. Benefits of Buying a Freehold Property
Full Control Over Your Property
When you buy a freehold property, you have the freedom to make decisions regarding your home without asking permission from a landlord. This might include altering the property, adding extensions, or even selling the land without the hassle of extending a lease (if allowed).
Long-Term Investment Stability
Freehold properties are often seen as a safer investment because they offer long-term security. With no lease expiring, you avoid the risk of having to pay significant fees for lease extensions.
Avoid Ground Rent and Service Charges
One of the most attractive features of freehold ownership is the absence of ground rent, service charges, or other costs associated with leasing the land. This can make freehold properties more affordable over time, as there are no extra charges like ground rent or service fees.
4. The Downsides of Freehold Properties
While there are many advantages to owning a freehold property, there are also some challenges to be aware of:
One of the main challenges is the responsibility for maintenance and repairs. Unlike leasehold properties, where the freeholder or managing company typically handles these tasks, freehold property owners must manage and finance all repairs and upkeep themselves. This includes repairs, upkeep of gardens, and any other external work, as well as maintaining communal areas if applicable. This can be both time-consuming and costly, especially if major repairs are needed.
Maintenance Responsibilities
As a freeholder, you are responsible for maintaining the property and land. This includes repairs, upkeep of gardens, and any other external work. These responsibilities can be costly and time-consuming, especially for large properties.
Difficulty in Financing Some Properties
In rare cases, some properties with freehold titles may face challenges when it comes to securing a mortgage. This can occur if the property has unusual features or is in an area where land is scarce, making mortgage lenders hesitant to provide financing. Most lenders generally want to see at least 70 years remaining on a leasehold for remortgaging.
5. Freehold Property in Preston
In Preston, freehold properties are common, particularly in suburban areas like Penwortham, Fulwood, and Longton. In these areas, many properties are sold freehold, offering buyers long-term stability and full ownership of both the property and the land. These areas tend to have older homes with freehold titles, making them attractive to families and those looking for long-term stability.
Popular Areas with Freehold Properties
- Penwortham: Known for its family-friendly atmosphere, Penwortham offers a wide variety of freehold homes, from traditional terraced houses to spacious detached properties.
- Fulwood: A desirable area for professionals and families alike, Fulwood has an abundance of freehold homes with access to excellent schools and amenities.
- Longton: A more rural area of Preston, Longton offers larger freehold properties with more land, ideal for those looking for more space and privacy.
How Freehold Affects Property Value in Preston
Freehold properties in Preston often hold their value better than leasehold homes, especially in areas with high demand for housing, such as Fulwood and Penwortham. The long-term stability of freehold ownership is appealing to many buyers, making these homes easier to sell and more attractive to future buyers, ensuring a smoother sale process.
6. What to Consider Before Buying a Freehold Property
Before purchasing a freehold property, there are several factors to consider:
Maintenance Costs
Although you don’t have to pay ground rent or service charges, freehold ownership means you’ll be responsible for the property’s upkeep. Be sure to budget for ongoing maintenance, such as repairs to the roof, windows, or garden. In some cases, a management company may be responsible for maintaining communal areas, but as a freeholder, you will still need to budget for your share of these costs.
Property Location
Some freehold properties are located in rural or less-developed areas. Ensure that the property is in a location that suits your lifestyle, with access to schools, transport, and local amenities.
7. Commonhold Properties
What is Commonhold?
Commonhold is a relatively recent form of property ownership introduced in the UK as an alternative to leasehold properties. In a commonhold setup, homeowners own their individual units, such as flats, while jointly owning common areas like hallways, gardens, and recreational spaces. Unlike leasehold properties, there is no single landlord; instead, homeowners collectively manage the property through a commonhold association. This collaborative approach can provide greater flexibility and fewer restrictions compared to leasehold properties. Additionally, commonhold properties can be more cost-effective since there are no ground rents or lease renewal fees. However, managing a commonhold property can be challenging, requiring cooperation and effective communication among all owners to ensure smooth operation and maintenance.
8. Freehold Property vs Leasehold Property: Which Is Right for You?
Choosing between freehold and leasehold depends on your preferences and lifestyle. Here’s a breakdown:
- Freehold: Ideal for those looking for long-term stability and full control over their property. Perfect for families, investors, and anyone who wants a permanent home.
- Leasehold: Often cheaper upfront but can come with ongoing costs and restrictions. Suitable for buyers who don’t mind paying ground rent or those who plan to stay for a shorter period. Leaseholders must also be aware of their rights and responsibilities, including paying ground rent and service charges.
Making the Right Choice
When buying a property in Preston, carefully weigh the pros and cons of freehold and leasehold to ensure you make an informed decision during the buying process. If you’re planning on staying in the area for a long time, freehold ownership may be the better option for peace of mind and long-term investment value.
At Key & Frame, we understand that navigating property ownership terms can be confusing. We’re here to help you find the perfect home, whether it’s a freehold or leasehold property in Preston. Our expert team can assist with off-market property deals, ensuring you find a home that fits both your budget and your long-term goals.
Contact us today to begin your house-hunting journey!
