Freehold vs Leasehold - Tips and Advice

Deciding whether a freehold or a leasehold is better for your needs depends on a number of different factors; most relate to what you want to do with the property. For example, if you are looking to extend your property, then buying a freehold would be better, however if you want to enter the buy to let market in the cheapest way, then a leasehold is better (we go into why later).

In this article we explain how you can best choose either a freehold or leasehold by considering your intentions for the property as this is likely to be the best way to decide.

Having a low maintenance home is something that suits some buyers when considering freehold vs leasehold. If this is the case, then maybe a leasehold is better for your needs than a freehold. With a freehold you have to maintain the internal and external parts of the property, including:

With the majority of leaseholds, it is the freeholder's obligation to maintain the above, although the cost for doing so is shared between the leaseholders. This may seem like a plus for buyers who want to have their property well-maintained but not do any of the work themselves.

Many people look to buy properties with the intention of extending them, normally to increase the property value and to gain more space. If this is what you want to do, then you're invariably looking at buying a freehold rather than a leasehold.

You wouldn't normally be looking to extend a leasehold property for these 2 main reasons:

Freeholds are easier to extend and develop as you own the land underneath the property. You should however check the Official Copy of Register of Title as there are some freehold titles that limit the number of properties you are allowed to build on the land involved.

As a rule of thumb, leasehold flats are cheaper than freehold houses, however you must factor in the monthly spend on ground rent or service charges. When taking into consideration the money being spent on these costs, you may find that the difference in cost is smaller than it first appears.

If you want to develop a leasehold property (if it's a case where this is feasible), you need to get freeholder consent to do so but this is unlikely to be granted.

If you're buying in the North-Eastern region of England, you might find that a tyneside lease is suitable for you. This is commonly found in two-storeys terraced properties, which are split into a self-sufficient ground floor and first floor flats.

With this type of lease, the leasehold owner of the ground floor flat also owns the freehold title to the upstairs flat, while the leasehold owner of the first floor flat own the freehold for the downstairs flat.

Although most houses are freehold, you can still buy a leasehold house. A leasehold house normally has a low ground rent to pay to the freeholder, however you may not have to pay any service charges.

That said, in 2017, some newly-built leasehold houses attracted very negative attention as the ground rent payments were very high and had the risk of becoming even more extortionate. Although the freeholders offered the option to buy the freehold on those properties, the price was eye-wateringly expensive.

Due to the Leasehold Reform Act 2022 coming into effect, a peppercorn ground rent limit will be applied to new residential leases that were granted after commencement of the Act. Historically speaking, a peppercorn ground rent mean a nominal or low value figure. Presently, you will not be expected to pay one actual peppercorn, so the Act effectively restricts ground rents to zero. This, however, does not apply to all leases.