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You may be one of the people who is considering to buy a leasehold property. Probably it’s the slightly cheaper price that attracts you or maybe it’s just the location you are looking in to. Regardless of what your reason is for getting a leasehold property, you will need to take into consideration several factors. 

Before we continue, there are some differences between a leasehold property and a freehold property. It does not have anything to do with the location of the property or how it’s built. The differences are: 

Leasehold Freehold
Leaseholds are often shared ownership properties. When you sign the legal documents, the property will not be permanently yours. You will own the entire property under your name as soon as you have signed the legal documents. There is no landlord.
There will be certain years to owning the leasehold property. It can be for 20 years, 40 years, 80 years, 99 years, 150 years, etc. Once the lease tenure is up, the property will be returned to the original owner. You may choose to pass it on to your next-of-kin before the lease is up. However, if the leasehold is for 50 years (for example) and the tenure is up when it is in your child’s name, your child will need to have that property returned to the original owner. There are no leasing time period to a freehold property. As long as it is under your name, it will stay that way until the time of your death or when you choose to pass it on to someone else – whichever comes earlier. Let’s say if you have passed away and you have decided to pass the property to your child. Your child may not want the property anymore and choose to sell it, they can do that.
If you are holding on to a leasehold property, it means that the original leasing owner is the freehold property owner. You are just leasing (read: renting) the property from him for a fixed period of time. If you are holding a freehold property, it means that the property has no “permanent” owner before it gets passed on to you. Hence, the property is 100% in your name.
Leasehold properties tend to be slightly cheaper in price as compared to freehold properties. Freehold properties tend to be a bit more expensive compared to leasehold properties.
As leasehold properties tend to be cheaper, it does not mean people do not want to buy it. The reason why people want to buy leasehold properties isn’t just for its price. People buy it as leasehold properties often come with more attractive and well-equipped with facilities and features. That’s how leasehold property owners sell their properties. Freehold properties are usually more expensive due to the location that they are situated in. It can quite likely locate at a place where it has easy access to many amenities. The property itself may not necessarily have a lot of attractive facilities and features. People often buy these properties due to its attractive locations.


Having cleared some basic information about the difference in leasehold properties and freehold properties, here are some things to consider before getting that leasehold property. 

1.      Remaining term of years on the leasehold 

If you are looking for a leasehold property to own, make sure that there should be at least 80 years or more remaining on the lease. If it does not have at least that much of years, the property may be unmortgageable. The lender may require the lease to be extended before they can agree to release the funds. 

If you are not buying with mortgage in mind, then you can ignore the aforementioned paragraph. You will still need to consider extending the lease before disposing the property. You must know, however, the property will lose its value as the term of the lease reduces. 

2.      Ground rent 

Ground rent means the rent you will need to pay the owners or landlords on an annual basis. The rent amount and when it is due alongside the rent details will be outlined in the lease. You will need to check the ground rent review formula so to make sure that you fully understand the ground rent to be paid in the future. The ground rent may affect the value of your property in the long run. 

3.      Maintenance charges 

Maintenance charges in most (if not all) properties are usually for commercial and residential purposes. In most cases, the maintenance fees are borne by the original owner. The smaller change costs will be borne by the occupants leasing the property. However, the tenants leasing the property will need to seek permission to make changes to the property before they can carry out the matter. 

4.      Property restrictions 

The ownership of the property is still with the original owner. That means the person leasing the property will need to know of any particular rules of the property before moving in. Find out from the original owner if you are allowed to keep pets in the property, be able to party in it, and others. The restrictions may not come off as much in the beginning. However, if you are planning to stay there in the long term, then it’s good to find out about all of these before signing that document. 

Bottom Line 

Leasehold properties may not necessarily locate in a place where it is highly-desired. However, even though with its lower price range does not mean that it is necessarily a bad property to get. If you need any help with leasing a property, feel free to contact us for further assistance.