Freehold, leasehold and commonhold: Understanding property ownership types

Freehold property ownership explained

When an owner purchases property with a freehold title, it means that they own the building outright as well as the land or plot that it stands on. It is the highest form of land ownership available in England and Wales.

There is no lease, no landlord and no ground rent is payable. Buildings insurance and any contents insurance is arranged by the freehold owner themselves.

There tends to be more freedom over the use, improvements and additions to a freehold property. The main restrictions come from covenants registered against the title deriving from other historic dealings with the property which often remain enforceable. Matters prescribed by legislation such as planning permission and building regulations also apply.

Freeholder owners are responsible for maintaining the interior and exterior of their homes and ordinarily the external grounds. Sometimes, there can be a freehold management company which looks after verges, accessways and shared community facilities. An estate service charge is then payable for that upkeep. When a freehold property subject to such management is bought or sold, a Freehold Management Pack (FME1) is produced by the management company to provide the buyer with maintenance information and costs ahead of their purchase.

Freeholders are free to sell their property without having to seek permission or incurring costs for obtaining permission to do so.

Leasehold property explained: Rights, restrictions and costs

Leasehold property, as the name suggests, means that it is subject to a lease. You purchase the right to live in the property (usually a flat) for a certain number of years subject to certain obligations and conditions. The building or block and the land it stands on are owned by the freeholder.

The lease can be granted for different terms of years, and it is always necessary to check how many years are left before purchasing the property as it will reduce over the passage of time. This is why leasehold properties can be described as ‘wasting assets’.

Under the terms of the lease, you will be required to keep certain promises made to the landlord and/or management company about how you will use and look after the property. You may also be required to pay an annual ground rent to the landlord, depending on the provisions in the lease.

Unlike freehold property, the use, improvements and alterations will be restricted by the lease and are often subject to the landlord’s prior written consent.

The landlord or management company is responsible for maintaining the common parts and the main structure of the building, including the roof, foundations and external walls, together with the grounds. The costs for the upkeep are passed to the leaseholders under a service charge, and each property contributes to the total cost. You will usually be responsible for the interior of your property and utilities.

When a leasehold property is bought or sold, a seller is usually required to provide information about service charges, ground rent, buildings insurance and management via the Leasehold Property Enquiries Form (LPE1), prepared by the freeholder or management company.

A leaseholder may require the landlord or management company’s consent to sell the property or a certificate to satisfy the requirements of HM Land Registry. Fees are usually payable.

What is commonhold?

Commonhold is another form of freehold ownership for flats and other types of multi-occupancy properties. Each owner, known as a unit holder, owns the freehold to their home. A commonhold association owns and manages the shared parts of the property.

The aim of commonhold was to:

• Have more control of the management of the property
• Alleviate high ground rent problems
• Remove wasting leases and the need for lease extensions

However, very few commonhold properties exist and the Government continues to look at ways to encourage more to be created.

Conveyancing experts

If you are buying or selling a freehold or leasehold property, understanding the ownership structure is essential to avoiding unexpected costs or delays. Our experienced conveyancing team can guide you through the process and ensure you know exactly where you stand. Get in touch today to discuss your property transaction.