Leasehold and freehold are the most common types of property ownership, although there is also ‘flying freehold’.
Freehold/share of freehold
A property purchased as freehold means you have outright ownership of the property and the land on which it sits. Freehold means there is no time restriction on owning the property and the status gives you the right to make alterations to the dwelling, within the law and planning restrictions. Some flats are sold with a share of the freehold.
Flying freehold - applies to part of a property
A flying freehold is part of a freehold property that overhangs land that does not belong to the owner. This could be a room located over a shared car port or a balcony that extends over a neighbouring property. Two issues can arise as a result of a flying freehold - finding a mortgage lender who will loan on a property of this nature, as it is a grey area in terms of the law, and gaining permission from the freeholder to make repairs on your part of the property which overhangs their land.
A leasehold property means you do not own the land the property is built on and you will only own the property itself for the length of the lease. Lease lengths can vary and when the set period expires, the freeholder is entitled to take back ownership of the property or, if they are prepared to do so, they can enter into negotiations to extend the lease.
Ground rent, if payable and service charges are usually payable to the freeholder and or managing agent when buying a leasehold flat and should be considered when working out a budget. The freeholder will use these payments to cover aspects including buildings insurance and the general maintenance of the property. When buying a leasehold property with a mortgage, the lender will prefer there to be 50 years left on the lease after the mortgage has ended. For example, for a 25 year mortgage, they’d be looking for a lease term of at least 75 year.