Purchasing a house and getting on the property ladder is one of the most exciting milestones in life. There’s no better feeling than having months, maybe even years, of searching come to an end when you finally secure the perfect place.
But what if your dream home is a leasehold and how does this alter the process?
In this article, we uncover everything you need to know when investing in a leasehold property.
What is a Leasehold?
A leasehold is when you purchase a property, but you don’t technically own the land that the property is situated on. This gives you the right to occupy the property for as long as the lease is valid. It is typically buildings such as flats that are leasehold properties.
Difference between Freehold and Leasehold?
When buying a property in the UK, there are two types to consider: freehold and leasehold. These differences are as follows:
Freehold: This is where a person owns the freehold of a property owns the property and the land it stands on, for an unlimited amount of time.
Leasehold: This is where a person owns the property, but not the land it’s on. The land is owned by a freeholder. Ownership of your property is also for a set period or lease, which can be a number of years depending on the length decided in your contract. Once your lease expires, ownership of your property then passes on to the freeholder of the land.
What Are the Pros of a Leasehold?
Despite what you may here, there are many pros to investing in a leasehold property. Here are a few worth mentioning:
- A leasehold property is usually cheaper than a freehold property
- The freeholder is responsible for building maintenance in communal areas, meaning you have less upkeep to consider
- The freeholder is in charge of overseeing the structure and maintenance of the building
- The freeholder also arranges building insurance
What Are The Cons of a Leasehold Property?
You may have heard Leaseholds get a bad rap from some people, and that’s because they do have some of the following disadvantages:
- You pay service charges and ground rent to the freeholder, which can increase over time
- You need written permission from the freeholder to change anything within the property
- You may not be allowed pets
- You may be prohibited from running a business from home
- It is likely you will be prohibited from sub-letting your property.
If you are allowed to sub-let, you may wish to enlist the help of a professional agency to help with the process of renting out your property.
