When buying a property, it is important that you understand the different forms of legal ownership: freehold, leasehold, or commonhold.
When you own a freehold property, you own the building and the land it is on.
Most houses are freehold but some – particularly new builds – may be leasehold.
When buying or selling through an estate agent, ask them if the property is freehold or leasehold, they should have this information.
When you buy a leasehold property, you are leasing the property from a freeholder (sometimes referred to as a landlord) for a specified period. Once the lease has expired the property reverts to the freeholder.
The freeholder will charge you ground rent and other fees such as maintenance fees, service charges, and buildings insurance.
You may also have to apply to the freeholder if you wish to make any major changes to the property.
If you buy a property with a short lease you will find it hard to sell in the future. You may therefore wish to purchase the freehold or extend the length of the lease. There is a cost to this, including additional solicitor’s fees.
Contrary to its name, commonhold is the most uncommon type of home ownership. Created by the Leasehold Reform Act 2002, it is a variant of freehold specifically set up for multiple occupancy buildings such as apartment blocks.
If you own a Commonhold property, you will own the apartment outright but as a freeholder you will also share ownership with the other apartment owners of the common parts of the building (staircases and hallways, etc) by way of a Commonhold Association.