What is Leasehold, Freehold and Share of Freehold in the Context of London Properties?
Purchasing a property is a significant investment, and understanding the different forms of property ownership is critical to making an informed decision. These become particularly relevant in London, a city with a rich tapestry of diverse and complex property types. Here, we'll explore the concepts of freehold, leasehold, and share of freehold, and their implications on property ownership in London.
Understanding Freehold
Freehold ownership is the most comprehensive form of property ownership. If you own a property freehold, you own the building and the land it stands on outright and indefinitely. It's your property until you decide to sell it. There are no time limits on your ownership.
This form of ownership typically applies to houses and means you are responsible for maintaining your property and land. You won't have to deal with a freeholder or manage any disputes with them, making it a more straightforward form of ownership. Plus, there are no ground rents to pay.
Understanding Leasehold
Leasehold, on the other hand, is more complex. Owning a property leasehold means you've purchased the right to live in the property for a specified period, not the land on which it stands.
Leasehold ownership typically applies to flats, particularly in London. The freeholder (or landlord) grants the lease for a term often ranging from 99 to 999 years. However, as the lease term shortens, the value of a leasehold property can decrease.
Leaseholders may also have to pay ground rent to the freeholder, service charges for the property's maintenance, and possibly need the freeholder's consent for property alterations. It's crucial for leaseholders to understand the terms of their lease since these contracts can often be complex.
Understanding Share of Freehold
Share of freehold arises when the leaseholders in a building collectively purchase the freehold from the landlord or when a new building is constructed, and the developer sells the flats as share of freehold from the start. This typically happens in a block of flats where leaseholders have formed a company to own and manage the freehold.
Under this arrangement, the flat owners own a share in the company that owns the freehold, thereby giving them a say in the management and maintenance of the building. However, each flat will still have a lease, which is necessary for clarity of possession and to protect the interests of mortgage lenders. Ideally, these leases are long (usually 999 years) and involve no ground rent.
In essence, a share of freehold can offer the best of both worlds, allowing for the communal benefits of leasehold with the control usually associated with freehold ownership.
The London Context
London's property landscape is unique due to its blend of historical and modern buildings, encompassing freehold, leasehold, and share of freehold properties.
Leasehold properties are common in central London, which consists largely of flats. Conversely, freehold properties, typically houses, are more common on the city's outskirts. Share of freehold properties are often found throughout the city where leaseholders have taken the opportunity to gain more control over their buildings.
Whether it's freehold, leasehold, or share of freehold, each form of property ownership has its unique considerations. Prospective buyers should thoroughly understand these before purchasing property in London. Given the complexities of the city's property market, getting legal advice is invaluable, especially for leasehold or share of freehold properties, to ensure a smooth and informed purchase process.