Freehold, Leasehold or Commonhold Ownership – What’s Right For You?
If you’re considering purchasing a property, you’ll need to familiarise yourself with the available forms of ownership. Understanding the differences between freehold, leasehold, and commonhold is essential to making an informed decision and ensuring that you choose the right type of ownership for your needs.
Our aim is to give you the tools you need to make informed decisions, whether you’re
· a first-time buyer
· an experienced property investor
· or simply looking to expand your knowledge
This guide will help you understand the pros and cons of freehold, leasehold, and commonhold tenures.
Do you have a burning legal question about freehold, leasehold or commonhold ownership? Call our specialist solicitors on FREEPHONE 0800 1404544 for FREE initial phone advice – with no strings attached.
2024 Leasehold update – The new Leasehold and Freehold Reform Act has been passed. It make some fundamental changes to freehold and leasehold ownership, though it doesn’t affect commonhold.
Keep up-to-date. Click here to read the Leasehold Reform Latest News
Freehold ownership
Freehold is the most common type of ownership, meaning you own the property forever. It is the usual way of owning houses – although there are a surprising number of leasehold houses nationwide.
And although freehold flats do exist (i.e. a freehold flat without any leasehold title the flat are stacked on top of each other like building blocks) they are very rare, and most lenders don’t like landing on them.
But freehold flats are quite different from the much more common “share of freehold” flat. This occurs where a number of leaseholders come together and jointly buy their freehold. They still each own a leasehold flat but in addition, they share the freehold between them.
Click here to read more about share of freehold
Key points of freehold ownership:
· A freehold gives you full control over the property.
· You are responsible for maintaining the property and paying property taxes and insurance.
· Repairs and maintenance are the responsibility of the owners.
· You can broadly use the property however you want, subject to local planning and building regulations.
Freehold ownership is considered the most desirable form of possession since it gives the owner complete control and security over the property.
Click here for more information about the difference between freehold and leasehold
Leasehold ownership
Leasehold ownership refers to property ownership for a fixed period, ranging up to 999 years, although most new leases are granted with either 99 or 125 year terms. Leasehold is the normal way of owning flats or apartments in England and Wales. but it does also apply to houses. According to the Department for Levelling Up, Housing and Communities, there are approximately 4.86 million leasehold properties in England alone – and you may be surprised to read that although 69% of those are flats, the surprising 31% are houses.
Key Points of leasehold ownership:
- Leasehold ownership gives the owner the right to occupy and use the property for a fixed period, subject to any terms and conditions in the lease agreement.
- The owner is responsible for paying ground rent and any service charge to the landlord or freeholder, maintaining the property and paying any property taxes and insurance.
- The leaseholder does not have full control over the property, as the landlord or freeholder retains the right to sell or transfer the property at the end of the lease.
- When the lease ends, the property returns to the freeholder.
- The leaseholder must vacate the property unless a lease extension is agreed
- And provided you meet the criteria, you will have the right to extend your lease by a further 90 years using what is referred to as a statutory lease extension,whatever your freeholder thinks. Although there is a price for this. And it is also always possible to agree an informal lease extension
Click here to read more about lease extension
When considering buying leasehold property, it’s essential to make sure that you understand the lease terms so it meets your needs and expectations. And if you’re not sure about any aspect of the lease, ask your conveyancing solicitor – that’s what they’re there for.
And it’s vital to remember that the remaining term of any leasehold property can significantly impact its value.
Commonhold ownership
Commonhold property is a type of ownership in which each owner of a unit in the building becomes a member of a commonhold association. This is most commonly used with a block of flats in the UK.
The association must have articles of association to govern its operations. The association is governed by directors, who can be unit owners or hired professionals, and decides how much money unit owners need to contribute for repairs and maintenance.
Unit owners can participate in the association and vote on decisions.
Key Points of commonhold ownership:
- Commonhold ownership gives multiple owners a stake in the property and the land it stands on and a share in the commonhold association. The commonhold association manages common areas and facilities, such as lifts, entrance halls, and parking spaces.
- Each owner is responsible for maintaining their unit and paying a share of the commonhold association fees.
- Commonhold ownership supposed to offer a more flexible and equitable alternative to leasehold ownership since it gives owners a stake in the property and land on which it stands.
Commonhold was introduced in England all the way back in 2002. And although successive governments have supported its extension, it has never taken hold in England. In fact it’s been estimated that there are still as few as 20 commonhold blocks in England and Wales.
In contrast the law in Scotland is very different, with a system similar to commonhold used extensively. However it is not without controversy. It’s recently been estimated that a remarkable 80% of Scotland’s apartments (owned under the commonhold type system) need some form of repair, with 50% in ‘critical disrepair’.
Can I buy the freehold of my leasehold property?
In general the answer is yes, provided you and your building meet the relevant criteria. And here at Bonallack & Bishop our leasehold team specialise in not only lease extension work, but we have also represented numerous clients in buying the freehold – in around 10,000 leasehold extension and enfranchisement transactions.
Click here to read more about leasehold house enfrachisement – the process of buying your freehold
Click here to read more about collective enfranchisement – the process by which a number of leaseholders exercise the right to buy the freehold of their block together
Can we convert leasehold block into commonhold?
Yes. Should you own a leasehold property in a shared building, you and the other leaseholders in the building may have the option to convert the building to a commonhold tenure. However, this conversion process requires the agreement of all parties involved, including the freeholder, all other leaseholders in the building, and their respective lenders. All parties must provide unanimous consent for the conversion to take place.
Our leasehold block is being badly managed – can we take over responsibility for block management?
In principle the answer is yes – provided you meet the relevant criteria. There are number of options available to you and our team happy to talk those through with you. But the most common of them are buying the freehold together or exercising your right to manage.
Click here to read about the differences between enfranchisement and right to manage
How does shared ownership fit in?
Shared ownership applies when you own part of the property, and the rest is owned by a third party – often a housing association. Both leasehold and freehold property can be subject to shared ownership.
And it’s possible to buy the whole of your shared ownership home, whether it’s a leasehold flat or freehold house. And it’s also possible to increase your ownership share in a process known as staircasing. We regularly act for clients buying and selling shared ownership property, and we are recommended by a number of housing associations.
Click here to read about shared ownership
Click here to read about staircasing
What about mobile park homes?
Park homes aren’t owned in the sense you own property. You don’t own the freehold or have a lease on the mobile home. You would normally buy the mobile home itself outright but pay rent on the pitch, as the site or land where the mobile home stands is called.
Click here to read more about park home conveyancing
Freehold, Leasehold or Commonhold – what’s right for you?
Each form of property ownership has its advantages and disadvantages. It’s essential to take the time to understand each form of ownership and make an informed decision. It’s about finding the right balance between security, control, and affordability. Owning a property is a long-term investment, so choosing a suitable ownership type to support your needs and vision for the future is crucial. Whether it’s freehold, leasehold, or commonhold, make sure you understand all terms and conditions before making a final decision.
