Is freehold better than leasehold?

Key Takeaways

• Freehold means you own the building and the land; Leasehold means you own the right to occupy for a fixed term.
• Freeholders avoid ground rent and service charges but are solely responsible for all maintenance and repairs.
• Leasehold properties are typically cheaper to purchase, making them popular for first-time buyers.
• Freeholders have full autonomy, while leaseholders may face restrictions on renovations or subletting.
• Properties with leases under 80 years can be harder to mortgage and may decrease in value.

What are the pros of owning a freehold?

• The property owner has complete control over the property and the land it’s built on.
• Freehold owners are not required to pay ground rent, admin fees, or service charges.
• There’s no time limit (lease) to consider - the owner holds the property indefinitely.

What are the cons of owning a freehold?

• Freeholds can be more expensive to buy than a leasehold property because you are buying both the building and the land outright.
• You’re responsible for all upkeep, from minor repairs to major structural work, so make sure to budget for these costs.

What are the pros of a leasehold property?

• You’re not responsible for maintaining or managing the communal areas and the land - that’s the freeholder’s job.
• Leases are typically set for 90 – 999 years, so you’ll know exactly how long you own the property
• Leaseholds can be cheaper to buy than a freehold property. Some first-time home buyers opt for a leasehold because they don't plan to stay in that home for a long time. It’s a (typically) more affordable first step on the property ladder.
• You have the right to ask your landlord for a lease extension. Previously, this would have been costly, but under new laws, leasehold properties will be given a new right to extend their lease at zero ground rent.

What are the cons of a leasehold property?

• You typically have to pay ground rent and service charges on a leasehold property, which can make purchasing a leasehold much more expensive than originally anticipated.
• The freeholder can decide to increase the ground rent or service charge whenever they like.
• When the lease expires, ownership reverts to the freeholder unless you extend it, so factor this into your long-term plans
• The freeholder can deny your request for a lease extension.
• It can be more difficult to get a mortgage on a property with a lease that’s under 80 years.
• It can also be harder to sell a property with a lease that’s under 80 years.
• As the lease gets shorter, the value of the property can go down, too.
• There can sometimes be restrictions around things like subletting, running a business on-site, or making structural changes.

Which is better, freehold or leasehold?

Whether freehold or leasehold is better depends on how much control you want over the property, the type of property you want to buy or can afford, and the individual conditions of the lease. Freeholds give you full ownership of the property and land indefinitely, while a leasehold is owned for a fixed term. With a freehold, you won’t pay any additional costs like ground rent or service charges, whereas you will have to pay these for a leasehold.

Because of this, if you go with a freehold, you will be fully responsible for the maintenance (and the associated costs) of the building and land, while many of these are handled by the freeholder if you’re a leaseholder.