Managing my money
Managing my money

This free course is available to start right now. Review the full course description and key learning outcomes and create an account and enrol if you want a free statement of participation.

Free course

Managing my money

6.1.5 Leasehold and freehold – some facts

Do you know the differences between leasehold and freehold? These are terms that are used every day in the property market world.

In this audio Martin sets out the basics, and gives you the heads up on the pros and cons of each.

Download this audio clip.
Skip transcript

Transcript

MARTIN:
Leasehold and freehold. Two terms we hear a lot of in the property market world, but do we really understand the distinction between the two?
Let's look at leaseholds. Did you know that the leasehold system dates back as far as the middle ages? Most flats in England and Wales are purchased on a leasehold basis. There are more than 2 million leaseholders in England and Wales. As leaseholders, they don't actually own the property outright, instead they've purchased from a freeholder the right to live there for a predetermined period, usually 99 to 125 years, though some leases can run for as long as 999 years. Leaseholders are required to pay a nominal ground rent, and considerable service charges. These are payable to the freeholder or an intermediary known as a managing agent who takes care of the property on the freeholder's behalf. Service charges include the costs of maintainence, repairs and building insurance. They may also include things like lifts, lighting, cleaning and gardening. Leaseholders can always ask for a statement of their service charges, they also have the right to inspect the freeholder's accounts.
There are some major disadvantages of owning a leasehold property. One of them is that the lease can, well, run out! Once the lease has expired, ownership of the property reverts back to the freeholder. However, the tenant can stay in the property, paying a market rent. It's also hard to get a mortgage for a leasehold property that has fewer than 50 years left on its lease. On the other hand, there are many short lease properties in the most expensive parts of central London. You can get as much as 50% off the purchase price of a flat if it has fewer than 40 years to run on its lease. It is possible to purchase leasehold extensions, or in many cases purchase a share of the freehold. However, buying the freehold may not always be of interest, as freeholders are responsible for managing maintainance, building insurance and other matters. An alternative to this is a resident's committee.
Though leasehold houses are common in some parts of the country, most houses in the UK are purchased on a freehold basis. Freeholders own their property outright, meaning they are fully responsible for the maintainence of the property. Since 2004 there has been a third form of property ownership. It's called 'commonhold' and it applies to new developments of flats. Under commonhold, each flat owner has a freehold stake in the building.
End transcript
Copy this transcript to the clipboard
Print this transcript
 
Interactive feature not available in single page view (see it in standard view).
MMM_1

Take your learning further

Making the decision to study can be a big step, which is why you'll want a trusted University. The Open University has over 40 years’ experience delivering flexible learning and 170,000 students are studying with us right now. Take a look at all Open University courses.

If you are new to university level study, find out more about the types of qualifications we offer, including our entry level Access courses and Certificates.

Not ready for University study then browse over 900 free courses on OpenLearn and sign up to our newsletter to hear about new free courses as they are released.

Every year, thousands of students decide to study with The Open University. With over 120 qualifications, we’ve got the right course for you.

Request an Open University prospectus