The Difference between Freehold and Leasehold Property Ownership under English Law

There are two ways to occupy a house or land in England; you can rent or buy. Since the Second World War, buying has been the popular choice. This article deals with buying a property in England and Wales. There are two types of purchase of a property or land, freehold or leasehold.

There is a significant difference between the two types of property or land purchase and it is worth knowing the distinction of lease and freehold if you are contemplating buying a house or land. First, let’s discuss a freehold purchase. If one buys a house outright or on a mortgage the house is usually sold freehold. This simply means not only do you own the house, but also the land the house is sitting on.

That doesn’t mean to say that the house is free of covenants. Quite often houses have covenants written into the deeds to protect certain alterations and sometimes to declare the right of passage by others across your land. You may own a house and land outright, but it does not necessarily mean you can do what you wish with it. The local authority too might have restrictions on what you can do with your home or land. This is particularly true of listed buildings. If you purchase a flat or an apartment, it is usual that the property will be sold under a leasehold agreement.

In practical terms, this means you buy the right to live in the property for so many years. If the lease is short you may the option to renew the lease but not always. The property remains in the ownership of others. You can at any time sell the apartment on to a third party, but what you are selling is the lease and not the bricks and mortar.

In most cases, you can make internal alterations if there is no landlord. When you purchase an apartment, there is usually a ground rent to pay. This is an annual payment to ensure the upkeep of the external building and sometimes a gardener to keep the grounds tidy and clean. The owner of the building ensures this is done on the leaseholder’s behalf. Leases with only a few years before expiry are cheaper, but offer less security. It is common for a new lease to be for ninety nine years. A lease for half this period offers a reasonable amount of security.