When it comes to buying or selling a home, the words freehold and leasehold will be bandied around plenty – but you might not always be clear on what exactly they mean. Does one model of ownership have advantages over another? And are you likely to find it more difficult to sell a leasehold compared to freehold?

Here, using our years of experience in the property market, we take a look at the main differences.

Leasehold – what’s the story?

Nearly all flats and apartments in England and Wales are leasehold, and all Shared Ownership properties fall under this bracket, too.

In essence, with a leasehold, you are in effect leasing the home from the landlord/owner of the building. This means you have purchased the exclusive right to live in your property for a fixed number of years – known as the term – but the structure and common parts of the building containing the flats or apartments are normally owned by the landlord/freeholder.

This means things like maintenance, upkeep of common areas, insurance and provision of services typically rests with the landlord, but leaseholders are usually charged ground rent and an annual service charge to help pay for this.

Leases will usually range from 99 to 125 years when first granted, but can be for much longer or shorter. Leases can be bought from the freeholder, either on an individual or collective basis, but this can prove tricky and costly.

The lease contract will set out the rights and duties of both parties – and it will probably be the case that, as a leaseholder, you will need to ask permission from your landlord/freeholder to carry out any major works.

The length of the lease falls over time from the date when it was originally granted, and therefore the outstanding term will depend on what was left when you took over the lease. What’s more, the lease will expire automatically at the end of the term, albeit most long leaseholders have a statutory right to stay on as renting tenants at the end of the lease, buy the freehold or extend their lease.

There has been an increasing trend for houses – typically always freehold – to be sold as leasehold in recent years, leading to many issues for homeowners. The leasehold scandal, which first properly came to light in early 2017, has swept in many of the UK’s biggest housebuilders who have been accused of mis-selling homes and leaving properties unsellable and unmortgageable. Many leasehold properties have also faced issues with unsafe cladding.

To combat this, the government has set out a number of reforms in recent years to the leasehold process, to ensure homeowners are better protected against various issues including unreasonable service charges and spiralling ground rents.

For some, of course, leasehold will be the better form of ownership, given the lower levels of responsibility for maintenance and upkeep this requires. Leasehold properties, because they are mostly flats, are also much more affordable in general, which means they are likely to be attractive to first-time buyers in particular.

Some sellers will find it more difficult to sell a leasehold at present, although the government is implementing steps to solve this.

Freehold – what do buyers need to know?

With a freehold property, by contrast, you own the entire building and the land that it stands on outright, in perpetuity, until you sell it or pass it on.

Freeholders face no service charges, ground rents, property management fees or admin costs, but you are responsible for the maintenance of your entire home and any garden space or land you have, which can prove costly over time.

Houses are nearly always freehold – although, as we explained above, there has been an increasing trend away from this, especially with new-builds.

The biggest advantage of a freehold over a leasehold is the lack of ground rent – which can in some cases double or triple every ten years – and the fact you don’t have to worry about the lease running out or any disputes with the freeholder. Typically, too, securing a mortgage on a freehold is a simpler task.

While you won’t have to ask permission from anyone else to make changes to your property, there may still be legal and planning restrictions to consider for certain major improvements. As a result, owners of a freehold home will have much more flexibility when it comes to carrying out building and renovation projects.

But, as mentioned above, you’ll also have all the responsibility for maintaining the fabric of the building – including the exterior walls and roof of your home, as well as the garden. This can prove prohibitively expensive if there is any major work that is required, for example to deal with subsidence, Japanese knotweed, roof problems or dry rot.

There are advantages and disadvantages to both forms of ownership, but it’s important that buyers fully understand what type of home they are buying – and the rights and obligations this includes – before committing to a purchase. This will keep problems and difficult conversations at a later date to a minimum.

Here at Oakfield Estate Agents, we provide a full block management service in Eastbourne, Hastings and Bexhill and across Sussex and Kent for a large portfolio of properties. We also offer a comprehensive property management service for investors and have a team of letting agents offering letting services to landlords and buy-to-let investors.

We can help investors understand the implications and potential problems surrounding leasehold, but also the rewards when done in the right and proper way.

Whether you’re a freeholder looking to pass the day-to-day management of your investment to a managing agent or a director of a right to manage company looking for a managing agent, Oakfield Estate Agents are the agent for you.

We offer services to cover all aspects of Block and Estate Management and will tailor the services we offer to suit your individual requirements. You can talk to our block management team today.