The main difference between freehold and leasehold property is their ownership. In a leasehold property, the property is leased to a lessor for a specific lease period, but the ownership of the land remains with the original owner. However, freehold property refers to the ownership of both the property and land on which it is built.
Freehold and leasehold are two terms that indicate the nature of ownership of a property. You have to know the difference between freehold and leasehold properties when looking for a potential apartment or home.
Key Areas Covered
1. What is Freehold Property
– Definition, Features
2. What is Leasehold Property
– Definition, Features
3. Difference Between Freehold and Leasehold Property
– Comparison of Key Differences
Key Terms
Freehold Property, Leasehold Property, Lease
What is Freehold Property
Freehold property is a property that is ‘free from hold’ of any entity other than the legal owner. The owner of a freehold property has the free ownership of the property for perpetuity. He or she can use the said property for any purpose, as long as that purpose is in accordance with local regulations. The owner can also sell the property at his/her will, and there is no need to obtain consent from the state or any other property; hence, the sale of a freehold property involves less paperwork. However, this also makes a freehold property more expensive than leasehold property.
Since the owner has complete rights to the property, there are no restrictions on the transfer of a freehold property. Freehold property is inheritable. In addition, the owner is also free of encumbrance and further payments; there are no service charges, maintenance charges, ground rent, etc. The owner knows the exact amount he/she pays when buying the property, and there are no further payments. Overall, he or she can do whatever he/she wants within the property (as long as it’s legal) without being answerable to anyone.
What is Leasehold Property
A leasehold property is a property a lessee or tenant contracts to rent from a lessor over an agreed-upon time. In other words, the lessor or the landlord owns the property, and the tenant or lessee holds the rights of the property for a fixed period of time and pays for the use of the property. Therefore, leasehold property only involves a temporary right to hold land or property. It is as if you own a house for a fixed time period, but you never own the land the house is built on; eventually, the house will revert back to the owner of the land. Most apartments and flats fall under the category of leasehold properties.
The legal agreement between the lessee and the lessor will stipulate how many years the lessee can live on the property and the nature of payments. Generally, tenants of leasehold property have to pay various charges such as maintenance charges, ground rent, service charges, etc. When the lease comes to an end, the property returns back to the landlord.
Difference Between Freehold and Leasehold Property
Definition
A freehold property is a property that is ‘free from hold’ of any entity other than the legal owner, while a leasehold property is a property a lessee or tenant contracts to rent from a lessor over an agreed-upon time.
Land
Freehold ownership involves the ownership of both the property and the land, while leasehold ownership only involves the property, not the land on which the property is built.
Time Period
A freehold property owner owns the property for perpetuity. But a leasehold ownership is temporary as the property reverts back to the landlord when the lease comes to an end.
Cost of Ownership
Leasehold properties are relatively cheaper since they are bought in a lease. However, freehold properties are more expensive since they also include the price of the land.
Rent and Payments
In leasehold properties, one may have to pay an annual rent or payments, but in freehold properties, there are no such charges.
Conclusion
When looking for a potential apartment or home, you have to know the difference between freehold and leasehold properties. The main difference between freehold and leasehold property is their ownership. In a leasehold property, the property is leased to a lessor for a specific lease period, but the ownership of the land remains with the original owner. However, freehold property refers to the ownership of both the property and land on which it is built.
Reference:
1. Mandell, Lisa Johnson. “What Is a Leasehold Property?” Real Estate News & Insights | Realtor.com®.
2. “What’s a Leasehold.” Money Saving Expert.
3. “What Is Freehold Property?” The Economic Times.
Image Courtesy:
1. “House, Mortgage, Home, Sold, Real, Estate, Property, Valuation, Commission, Handshake, Location, Commercial, New, Structure, Residential, Realtor, Agreement, Buy, Cartoon” (CC0) via Pxhere
2. “Writing, hand, pattern, paper, brand, art, contract, sketch, drawing, design, handwriting, document, available, signature, lease” (CC0) via Pxhere
Leave a Reply