Boost in supply of properties for sale

Freehold and Leasehold Property Types

If you are currently shopping for property, one thing you need to determine is whether the property you are interested in is a freehold or leasehold property. Most property currently on the UK market is freehold, but increasing numbers of developers and property management companies are selling homes and flats as leasehold properties. Understanding the difference between the two is important, as the rights given to the buyer vary depending on the type of property purchased.

Freehold property provides the owner complete and unqualified ownership of the land and of all buildings located on the land. The owner of a freehold property is therefore able to use the property as he wishes, if the use of the property does not violate local planning regulations. Because of the increased rights freehold property owners are permitted, this type of property is typically more expensive than leasehold property.

A leasehold property is one that is occupied by a tenant for a long period of time. This amount of time can range from 99 to 999 years, and the property can be bought and sold numerous times during that period. The term of a lease is fixed, and decreases every year. When the lease term expires, the building is returned to the owner. Leasehold properties can be flats or houses, and are found in purpose-built blocks, converted houses, or as part of a large commercial site.

The freehold owner retains complete ownership over the external and structural walls at all times, and remains responsible for all maintenance and repairs on the building even while it is being leased. Individuals and companies are the most common owners of leasehold properties, but local authorities and housing associations sometimes own this property type, as well.

When a group of leaseholders buy the freehold of a property, it is called collective enfranchisement. In order to buy the freehold of a property together, the group must meet certain requirements. The purchase of a leasehold property is subject to the terms listed by The Leasehold Reform Housing and Urban Development Act, 1993. This law states that a minimum of one-half of all qualifying leaseholders must participate in the scheme to purchase the property.

Property Leasing

A lease refers to a legal contract between the owner of a property and a leaseholder. A lease provides the leaseholder with conditional ownership of the property for a fixed amount of time, generally between 99 and 999 years. It also outlines the rights and responsibilities of the freeholder.

Leases list the contractual terms and obligations of both parties, and are often written in hard-to-understand legal jargon. For this reason, it is extremely important to have your solicitor carefully examine your lease and explain the details of the contract to you in terms that you are able to understand. Misunderstanding even one condition on the contract may result in years of regret.

In addition to listing the rights and responsibilities of both parties, a lease provides details on a number of conditions important to the arrangement. The amount of rent owed should be included in the lease, and information outlining how repairs to the structure will be made should also be listed. Any problems with the lease need to be sorted out before the contract is signed, even if it results in a delay of the sale.

All leases are different, and the terms and conditions listed on your lease need to be carefully considered before you agree to sign. It is generally not a wise idea to accept a lease with less than 60 years remaining on the contract, and as the time remaining on your lease decreases, you may find it increasingly difficult to get out of it.