15 Nov, 2017/ by Homeward Legal /First Time Buyer
In England and Wales, properties can be freehold, leasehold or, less frequently, commonhold. So what do these terms mean and what effect do they have on a house purchase for a first-time buyer?
The freeholder of a property owns outright both the property and the land it's built upon. As the freeholder, you are solely responsible for the maintenance of both the building and the land.
Freehold properties are usually houses, rather than flats or maisonettes, but not always. The benefit of freehold is that you have no maintenance or rental charges to pay to the landlord (or leaseholder).
When you purchase a leasehold property, you only own the property and its land for a fixed period of time, or the length of the lease. When you buy a leasehold, you are also taking over the existing lease from the seller so it's essential to find out exactly how many years are left to run on it.
Mortgage lenders will usually insist that a lease runs for a minimum 25-30 years beyond the length of the mortgage, so shorter leases may prove hard to finance. You must also take into account how long will be left on the lease when you come to sell the property to ensure you can find a buyer.
If buying a leasehold house or flat, ensure you budget for ground rent and communal repairs, such as maintenance to shared grounds and common areas and insurance.
Two years into your lease, you are entitled to renegotiate its length with the leaseholder.
A tiny minority of buildings across England and Wales are now held commonhold, which is a form of freehold ownership. This reform, introduced in 2002, allows flat owners to come together to achieve full ownership of their property by forming a commonhold association. The association then establishes its own rules and regulations for the maintenance and upkeep of the common property.
Homeward Legal's solicitors and conveyancers offer expert, clear advice on buying freehold, leasehold or commonhold.
If you're a first-time buyer, check out Homeward Legal's comprehensive First-Time Buyers' Hub where all your questions about purchasing for the very first time are covered in detail.