It is important to understand what a leasehold and freehold is as the difference could well end up effecting your outgoings when purchasing. In a nutshell when purchasing a leasehold property, you’ll only own the leasehold property for a fixed period of time. If you own a freehold property then you will own the property indefinitely. One way of looking at it: a leaseholder owns the property itself, but not the land it stands on. The land itself is still owned by the ‘freeholder’ (the landlord). When the lease runs out the property will revert back to them.
So how does a leasehold effect you when buying?
Leasehold property owners have a legally binding agreement with the Freeholder called the ‘lease’. This document will have the details of the property included and the date that the lease comes to an end, at this time the ownership of the property will revert back to the landlord/freeholder.
The legality of the conveyancing process for leasehold properties can be more complicated than a freehold so it is also worth bearing in mind that the legal fees will be more than that usually associated with a freehold property.
Lenders will often not lend on a ‘short term lease’. It depends on the lender but the usual length of time that is deemed as a short term lease is a lease term of up to 80 years.
A leasehold property can be turned into a freehold property should the freeholder be happy to sell the leasehold to the owner of the property. The asking price will most likely be dependant on the length of time remaining on the leasehold contract.
The most common property types associated with a leasehold are flats and apartments. There may well be charges associated within the leasehold document to cover landlords as they may well be responsible for the upkeep of certain aspects of the building. i.e. lifts etc.