THIS is a question I get asked a lot and there is a dominant perception that freehold is much better than leasehold. In London, approximately 70 per cent of all flats are owned on a leasehold basis, and the concept of owning your property this way can be uncomfortable for many buyers. However, it doesn’t need to be.
Most houses are owned on a freehold basis, which essentially means that you own the entire property and the land which it sits on.
If you own a flat, this can either be on a leasehold basis, where you own the flat for a certain period of time, or on a share of freehold basis, whereby you own your share of the freehold building and your neighbours, the other co-freeholders, collectively own the freehold. If you own a share of freehold, you and the other co-freeholders have more flexibility to decide how the building is run — but with this comes more responsibility.
It is down to you and your co-freeholders to manage the building yourselves, unless the building is big enough to warrant you appointing and paying a professional property management company to manage it for you.
Managing the building yourselves can work really well if you all have similar standards and expectations for how you would like communal areas to be presented, but can cause big problems if you don’t. You will all need to agree on items such as expenditure if you want a smooth running building.
The common perception that leasehold properties are very restrictive is not entirely accurate. Most leases allow you to make changes to your property as you wish and prevent the freeholder from unreasonably withholding permission for you to make alterations. Do always check the lease though before you buy the property.
And while you have less control over the running of the building, you equally have less responsibility. For example if a fellow flat owner has not paid their share of the service charge, it is the freeholder’s responsibility to chase it up, not yours. While leasehold properties do require the lease to be extended, this can be easily managed; as long as you extend the lease before it drops below 80 years. The cost will be marginal compared to extending a lease of below 80 years. There are pros and cons to both and the property should be the driving factor and the leasehold or freehold element should be much lower down on your list, after location, layout, what floor it is on, the building, the outlook, and so on. Therefore keep an open mind when looking for a home to buy.