When buying a property, you will often come across the terms freehold, leasehold and commonhold – but what do these mean? It is important to learn the difference between these types of property ownership as they each have their own pros and cons. It is up to you to decide what is the most suitable for your lifestyle and budget.
What is a Freehold property?
Freehold is the most common and complete type of property ownership. If you own a freehold property this means you own both the building and the land it stands on outright. There is also no time limit on freehold properties, your ownership is permanent until you decide to sell. As you own the whole of the property and the land, you are responsible for maintaining everything, including any garden or driveway.
What is a Leasehold property?
Leasehold is the most common type of property ownership for flats and apartments, but there are leasehold houses as well. Owning the leasehold gives you the right to use a property for a set period of time as outlined in the lease agreement with the freeholder (also known as the landlord). As the owner of the leasehold, you own the property for the duration of the lease, which can range from a few years to 999 years. Unlike owning a freehold property, if you own a leasehold property, you do not own the land that the property is built on, this is owned by the freeholder/landlord.
As you do not own the land the property is built on, you are usually required to pay ground rent, service charges, and maintenance fees to the freeholder. These payments are usually sent to a management company who act on behalf of the freeholder. Similar to when renting a property, you will need permission from the freeholder to make any major changes to the property. You may also need permission to have any pets and if you plan on running a business from home. One other thing to note about owning a leasehold property is that the landlord is responsible for the maintenance of the land. This also includes any shared areas such as communal gardens and hallways.
How much time remains on the lease?
Lease terms can differ significantly, though most new leases are granted for between 99 and 125 years, with some extending up to 999 years. If you’re purchasing a leasehold property, it’s essential to check how much time is left on the lease, particularly if it’s not newly granted. Leases with fewer than 80 years remaining may impact your ability to secure a mortgage. Additionally, you typically need to have owned the property for at least two years before you’re eligible to apply for a lease extension.
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What is a Commonhold property?
Commonhold is the rarest type of property ownership. It was introduced by the Commonhold and Leasehold Reform Act 2002 as an alternative to leasehold ownership, particularly for flats and other properties with shared areas. Unlike leasehold, commonhold means you own the property outright and forever, not just for a set period of time. Shared areas such as hallways, gardens and roofs are owned and managed collectively by the ‘Commonhold Association’, which is a company made up of all the unit owners. This means that decisions about the maintenance, rules and costs of the shared areas are made by the owners/residents, rather than a separate landlord or management company.
What Is the New Commonhold Model for Homeownership in England and Wales?
The Government has recently announced plans to reinvigorate commonhold and bring the current leasehold system to an end. They have proposed a ban on the granting of new leasehold houses (with some exceptions), as well as making it cheaper and easier for leaseholders to extend their lease or buy the freehold of their property. They also want to reduce ground rent to a peppercorn (meaning a very low or minimal amount), as well as improve the transparency on how service charges are spent.
These changes are in an effort to prevent landlords and management companies from charging unreasonable costs, and subjecting homeowners to unfair living conditions. The Government wish to empower leaseholders by giving them more rights and security, so that homeowners will have a greater say in how their home is managed and the bills they pay, rather than third-party landlords.
At time of writing we cannot yet say when, or indeed if, these reforms will come into effect. But the Leasehold and Freehold Reform Act 2024 received a Royal assent on the 24th of May 2024, and the Government has stated that they are committed to implement the Act ‘as quickly as possible’.
The Leasehold and Freehold Reform Act 2025
Find out more about the Leasehold and Freehold Reform Act 2025 including the latest news coming from the Government on the matter by clicking here.
How can we help?
If you are buying a property, whether it be freehold, leasehold, or commonhold, our specialist Residential Conveyancing Team can help. We can assist you in navigating the intricacies of the matter ensuring that you fully understand the detail of the transaction before proceeding.
We will guide you through each step of the conveyancing process, from reviewing title deeds and lease terms to explaining your rights and responsibilities as a property owner. Our goal is to ensure that you feel confident in your decision and protected throughout the purchase.
Find out more about how we can help you with your property purchase by calling our team at any of our offices or, for a no-obligation conveyancing quote use our online conveyancing quote tool.
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