Should I buy Freehold or Leasehold?

Awooga!

Let us, for a moment, imagine it’s a Friday night circa 1994. We’ve switched on the telly box and Ulrika Johnson is holding a mic in one hand and a tantastic muscle bound athlete in the other. She’s introducing us to a new gladiator this week, who goes by the name of Freehold. You then hear the familiar dulcet Scottish tones of John Anderson, as the camera zooms in on his referee stripes. “Freehold, you will go on my first whistle” he growls, while another Olympian-esque, lycra clad beast jumps on the spot next to him. “Leasehold, you will go on my second whistle”. The audience of estate agents are audibly pumped. You might even do a little gasp yourself as you see the obstacle course of property related issues, laid out in front of them. 

“3 … 2 … 1 …” Freehold Begins

Whilst our newbie traverses the floor like a pro, let’s find out some more about Freehold. This particular contender, for example, pays no annual ground rent charges and doesn’t rely on a separate freeholder to maintain their building. Nifty. Freeholder has sole responsibility for the maintenance of their building and the land so happens to be somewhat of a green fingered warrior. In fact, this property owning gladiator owns their property, the land it sits on and the space above it. Not too shabby.

Leasehold Catches Up

But what’s this? The second whistle has been blown and Leasehold is taking the floor. As the most common form of ownership for apartments, Leasehold is here for a good time not a long time. They don’t hold responsibility for maintaining the building, as they own their property but not the land or the building. Leasehold pays ground rent, service charges and maintenance fees leaving more time for going to the gym over gardening and DIY. Leasehold is here for a finite period of time so don’t get too attached, particularly if you were hoping they’d bring their pet wolf along. Pets are often subject to restrictions as per the terms of the lease, which usually restricts major cosmetic changes too. So don’t get your hopes up for a leotard makeover.

Extending Leases

Whether our Leaseholder gladiator owns a flat or a house it is possible to extend the lease with both. To do so requires extra costs however, as these two gladiators are in demand and don’t come cheap. 

Leaseholder in particular should take into consideration a number of factors before proceeding and seek legal advice first. They should consider whether it’s worth extending, how much value the longer lease will add to their property (and performance on the obstacle course), how expensive it could get if they do not extend (the lower the years left the more expensive) and whether they are looking to sell it anytime soon.

Under normal circumstances, Leaseholder has the right to extend their lease by 90 years. That’s a long time playing with oversized cotton buds. A premium must be paid in order to extend the lease and Freeholder can negotiate, accept or reject the offer. 

Commonhold

Hold the cordless phone. A new contender has rushed the stage. It’s 2002 now and The Leasehold Reform Act, formerly known as Ulrika Johnson, is introducing a replacement for Freehold. They are a multiplayer strong team, calling themselves the Commonhold Association. What’s their game? According to them, every owner of each flat or unit within a multi-occupancy building owns the freehold of that flat, whilst any communal areas of the building are managed and owned by the Commonhold Association. The Commonhold Association is a company collectively owned by all the freeholders. 

These contenders are pretty rare on the property obstacle course, however, and as with any collective ownership and management system, issues can arise between members of the association. Let’s see if any discrepancies play out on the floor tonight.

Shared Freehold

Another new multiplayer team? These guys look very similar to the Commonhold crew.

Indeed, the Shared Freeholder plays by a similar system, with all leaseholders jointly owning the freehold. Each owner of a leasehold property within the development or complex owns a share of the freehold, and management of the building as a whole is shared by all the leaseholders. Sounds like these agile athletes are ready for a fight.

Don’t Try This At Home 

Whilst we’ve had enormous fun this evening watching our various property owning gladiators take to the stage, we know it’s a minefield out there in the real world. Each leasehold situation is different and holds a whole new set of challenges and requirements. To make sure you’re fully pumped, prepared and lycra-clad, it’s always best to speak with your local property experts / referees at Davies & Davies who’ll find you the best options for your situation. Gladiators, ready!

alex@daviesdavies.co.uk – Lettings Manager (contact for lettings and property management)
mark@daviesdavies.co.uk – Sales Manager (contact for sales, new homes and chartered surveying)

020 7272 0986
Davies & Davies Estate Agents, 85 Stroud Green Road, London, N4 3EG

Article and Imagery by Barefaced Studios