UK Property, Differences between Freehold and Leasehold Title

The UK property market is attracting several buy to let investors and many of our buyers from our Dubai office are regularly asking the differences between freehold and leasehold title when they buy property in the UK. International investors looking at the UK market for the first time may be unsure of the different property ownership legal titles. Here we aim to illustrate the differences between freehold and leasehold title. When you are considering buying a property you should find out what title you will receive, as the property for sale may be a freehold, a share of freehold or leasehold ownership. Hanover Square has put together a brief explanation to help inform our property buyers. We aim to shed light on the short term and long term differences and elaborate on the differences in title.

Differences between Freehold and Leasehold Title

Freehold Title If you buy a free hold property, you will own the building and the land beneath it that it stands on. Also referred to as  ‘title absolute’. As you own the title to the land beneath your property you do not have to pay a ground rent. Additionally, you do not pay building maintenance fees, often called service fee, or service charge. Conversely, the owner will have full responsibility for maintaining the property and costs for all maintenance. Freehold title is usually the title issued with Independent houses or villas in the UK.

Leasehold Property

Leasehold ownership is common in apartments. In apartments it is not possible for the owners to own the land beneath their apartment. Therefore, a leaseholder has the legal right to the property for the agreed term of the lease. Once this term runs out, ownership will return back to the freeholder. There are legal provisions to extend a lease. Historically, a lease term would last for 99 or 125 years. It is now becoming more common that developments sell the property with leasehold ownership for lease terms of 250 or 999 years in many new build developments. The leaseholder, will have a contract with the freeholder. This contract outlines the rights and responsibilities of each party. There will be a cost to extend a lease, flats and apartments are generally sold with a leasehold.

Share of Freehold

Some properties, are sold with a share of the freehold. Therefore, it shares the same plot of land as other homes. This is more common in larger houses which have been divided into smaller apartments. The responsibility of the maintenance is shared among the owners who share the freehold. The freeholders may appoint one of the owners to handle maintenance issues alternatively the parties may elect to hire an external managing agent. If you are considering buying UK property, and want to find out more, please contact our team. Click here to see our available properties for sale