Q. I am a first time buyer and completely ‘green’ when it come to the property world. A few people have advised its far better to buy a Freehold property than a Leasehold as you don’t need to pay high service charges but to be honest I have no idea of the difference between Freehold and Leasehold?! Are you able to give me a brief overview of the different ways that property can be held and purchased so that I am able to make an informed decision of the best way forward?
A. Buying your first property can be a complete minefield and there are plenty of things that you need to familiarise yourself with before moving forward with an actual purchase. Here is a brief explanation of the various ways to hold and purchase property.
Leasehold: A leasehold property means you have the right to live in it and occupy the land it stands on for a fixed period of time – the length of your lease. This can be a varying term but commonly 99 years, 125 years or 999 years. This type of property will incur service charges for the services rendered. A managing agent will look after the building and depending on the type of development from a basic purpose built block with no facilities to a gated development with Leisure facilities and concierge you will be charged according usually by the square footage of the actual apartment. You will also incur a separate Ground Rent Charge payable to the Freeholder for this type of property too.
Freehold: When you buy a freehold property you own the property and the land outright and are responsible for maintaining them.
Share of Freehold: This is when the freehold of the property is owned by a limited company and the shareholders are the owners of the property, usually the owners of apartments within that building. This is considered a very favourable way of owning property. Owning the share of Freehold will mean you have more control over what happens within the development. Service Charges will still be applicable as per a Leasehold property, but you will have control over the finances and have the final say when it comes to spending your service charge fees albeit collectively as shareholders.