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Key characteristics of freehold ownership

Outright ownership

When you own a freehold property, you have outright ownership of both the building and the land on which it sits.
This means there is no expiration date on your ownership, allowing you to retain the property indefinitely unless you decide to sell it.
This indefinite period of ownership allows for long-term planning, making freehold tenure an attractive option for family offices and high-net-worth individuals seeking stable, long-term investments.
Most buildings in the UK are sold as freehold properties, offering owners greater long-term security.

Legal rights and responsibilities

While freehold tenure offers considerable advantages, it also comes with certain responsibilities.
As the freehold owner, you are solely responsible for maintaining the property, including the exterior walls, roof, and any communal areas if applicable.
This responsibility extends to buildings insurance, ensuring the property is adequately protected against potential risks.
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Maintenance and repairs: Unlike leasehold properties, where the landlord or a management company is often responsible for maintaining communal areas and exterior walls, freehold ownership places the burden of maintenance directly on the owner.
This includes routine upkeep, repairs, and any necessary building works. While this may require a higher level of involvement, it also allows for complete control over the property's condition and appearance.

Building insurance: As a freeholder, you must arrange buildings insurance to cover the cost of repairs or rebuilding in the event of damage. 
This differs from leasehold tenure, where the landlord typically arranges the insurance and passes the cost on to leaseholders through service charges. 
Having control over your own insurance policy can be advantageous, as it allows you to tailor the coverage to suit your specific needs.

No ground rent or service charges

Unlike leasehold properties, freehold tenure does not require paying ground rent or annual service charges.
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This can result in significant savings over time.

However, as an owner you must budget for maintenance fees and building works, as you are solely responsible for the upkeep of your property.

Comparing leasehold and freehold tenure

Leasehold properties

Leasehold means that you own the property for a set number of years, decades, or even centuries, depending on the lease's length.
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Leaseholders must pay ground rent and may be subject to service charges and maintenance fees. If it's a short lease, when it expires, ownership of the property reverts to the freeholder.
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Leaseholders may face restrictions on how they can use their property and must obtain permission from the freeholder to make significant alterations.
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Lease extensions and enfranchisement: Leaseholders can face additional costs and legal processes if they wish to extend their lease or purchase the freehold — a process known as enfranchisement.
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These procedures can be complex, time-consuming, and expensive, often involving negotiations with the freeholder and possibly legal action if an agreement cannot be reached.

Freehold properties

Freehold tenure offers more freedom and control over the property.
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There is no need to pay ground rent, and owners are not subject to the same restrictions as leaseholders.
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This type of tenure is particularly advantageous for those looking to buy a property as a long-term investment, giving you more control to develop the property.

Commonhold properties

Another tenure type worth mentioning is commonhold, which is often used for buildings divided into multiple flats.

In a commonhold association, each flat owner possesses a share of the freehold and is responsible for communal areas through a commonhold association.

This structure eliminates the need for a traditional leasehold contract with a freeholder and provides more autonomy to the individual flat owners.

Practical considerations

Mortgage lenders

Freehold properties are often viewed as more stable investments, and mortgage terms can be more favourable compared to leasehold properties with short leases.

Land registry and title absolute

When purchasing a freehold property, the transaction is registered with the Land Registry, providing the buyer with a title absolute. This legal document confirms the buyer's ownership of the property and the land.

Maintenance and major works

As a freehold property owner, you must plan for maintenance and major works.

Unlike leaseholders, who may pay for these through service charges, freeholders must manage these expenses independently.

Regular upkeep is essential to maintain the property's value.

Frequently asked questions (FAQs)

What is the main benefit of owning a freehold property?

The primary benefit of freehold ownership is the full, outright ownership of both the property and the land, offering greater control, security, and freedom compared to leasehold properties. 

You are not subject to a lease expiry date, ground rent, or service charges, and you have complete autonomy over structural alterations, subject to planning permission.

Do I need to pay any ongoing fees for a freehold property?

While freehold ownership does not involve paying ground rent or service charges to a landlord, you are responsible for maintenance, repairs, and buildings insurance. 

These costs are ongoing but are typically less burdensome than the combined expenses associated with leasehold tenure.

Can I convert a leasehold property to freehold?

Yes, it is possible to convert a leasehold property to freehold through a process called enfranchisement.

This involves purchasing the freehold from the current freeholder, which can be a complex and costly process. 

The cost will depend on factors such as the length of the remaining lease, the property's value, and negotiations with the freeholder.

What are the legal responsibilities of a freeholder?

As a freehold owner, you are responsible for the upkeep of the property, including maintaining the exterior walls, roof, and any communal areas.

You must also ensure that the property is adequately insured through building insurance.

Additionally, any building works or structural alterations must comply with local planning and building regulations.

How does freehold tenure affect planning permission?

Freehold owners often have greater freedom to apply for planning permission for modifications, without needing to seek approval from a landlord or management company.

How does freehold tenure affect property value?

Freehold properties often hold their value better than leasehold properties, particularly as there is no diminishing lease term to consider.

Freehold tenure is generally more attractive to buyers, providing an added layer of security and fewer complications in terms of ongoing costs and legal obligations.

An attractive option

Understanding the nuances between freehold and leasehold tenure is crucial when considering property ownership in the UK.
Freehold tenure provides greater control, fewer ongoing costs, and long-term security, making it an attractive option for high net worth individuals seeking to invest in property.
Maritime Capital specialise in guiding family offices and private clients through the complexities of the property market.
Get in touch to learn how we can assist you with your property investment needs.

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