Leasehold vs freehold

[blackberrypies]

Please bear with my ignorance, I have no one else I can really ask this to tbh as I feel a bit silly not knowing.
I am planning to buy in London. I currently have a freehold property outside of London. Everyone in my small and small minded family told me that I had to buy freehold and god forbid what would happen if I bought got leasehold.

Obviously in London chances of me finding a freehold for my budget (£700k) is minimal.

So, before my family start ranting, what are the real difference and should I stay outside of london to own a freehold vs buying a leasehold flat more central which ideally is what I’d like.

FWIW I don’t understand it all therefore I have no opinion either way.

As long as the lease has >100 years on it, it’s fine.

One drawback of leasehold is that you may have to ask the freeholders permission to make changes, they seem to have permission to charge exorbitant fees for this, and can ultimately say no

Be careful, I know people in leasehold flats that have had bills of several thousand pounds because the freeholder decides to do work - even if it is of no benefit to them eg ground floor flat owner having to get a loan out because the freeholder decides to replace all the windows on second and third floor

If I possibly could I would get freehold. We had a leasehold flat and paying extra charges (when we were moving to have place painted as leaseholder decided this was needed ), having to buy extra years on leasehold to sell was a hassle I could well do without. Much of London, flats etc are usually leasehold and houses not.

Oh dear @batshitbetty that would be our worst nightmare. No spare cash lying around for that stuff.
I didn’t realise that, my family are worried about pretty much every thing so it’s hard to pick out what’s actually a worry or not.
I am concerned it will therefore price us out of central London. Annoyingly you can’t search on Rightmove freehold / leasehold.

Well £700,000 isn’t great for central London anyway. Flats might have a share of the freehold, but you have to get freeholders’ permission to get anything done to the outside of the building. Some people still won’t pay! Eg decoration to entry areas, new front door etc.

Some freeholders charge leaseholders quite a lot. However a good one will respond and keep the property in tip top condition which means it will sell! Manky ones are a turn off.
Leaseholders are able to contact the freeholders agent to get the repairs done. However, there are charges!

Essentially if you only want freehold in London you will be seriously cutting down your options! Look at the quality of the building, the annual service/maintenance charge and decide if it’s for you. New builds usually charge more. Where are you intending to look?

It depends what you are looking for. If it's a house it is more likely to be freehold, but £700k won't get you a house in central London, you would need to look to the edges of zone 2 into zone 3 to get a house for that money I reckon.

If you are looking for a flat it is much more likely to be leasehold, although some share of freehold flats do exist (I just sold one).

One of the big risks with leasehold is a freeholder that doesn't give a stuff. That can mean it is very difficult to get repairs done to the fabric of the building, e.g the roof.

If you do buy leasehold, talk to the other leaseholders, find out what they think of the freeholder/management company. Ask if any major repairs or renovations are expexted and how they have been managed in the past. If the lease is long and the freeholder/management company has a good track record, then it should be fine.

Lots of useful advice on this thread - the major difference is that if you own a freehold property, you own it outright. If you buy a leasehold property you are effectively buying the right to live in it for the remainder of the lease, but you don't actually own the fabric of the building. That's less of an issue if the original lease was for 999 years (quite common in the NW where I'm from) and there are 850 years left. There will often be a ground rent to pay too.

As long as the lease has >100 years on it, it’s fine.

That depends on the lease. As said above, some leases have restrictions as to what you can do, i.e. some stipulate you can't have pets etc. Also, depends on what liabilities it places on you. You can find yourself liable for huge building renovation costs, usually completely outside your control, i.e. when the management company "decide" to replace the roof, you have to pay, whereas if you own the freehold, it's up to you when/whether to replace or just repair your own roof. You may also have no control over the workmen doing work in your property, i.e. replacing pipework or electrics whereas if you own the freehold, you decide who to engage and can agree timings etc. There is also usually a "management fee" for the cost of cleaning, decorating, gardening, maintenace etc of communal areas - people think this is all there is, but it won't cover the big (rare) stuff like new heating systems, rewiring, new roof, new windows, rendering, cladding, etc.

At the end of the day, you have to go in with your eyes open, get the lease properly checked over so that you know your rights and obligations etc (so you can plan for them).

Oh yes definitely have Rightmove houses search off on our quest for central! 2 bed flat at best so I’m questioning leasehold as realistically that’s all that’s left in central unless you are an oligarch!
So I’m trying to understand if leasehold is with perusing or the dream of central is just that, a dream

*worth pursuing

@BubblesBuddy you are so right £700k is nothing! But one can aim high?! I can buy a dump and live elsewhere in the meantime so here’s hoping!

I’d say never never never never never never again.

...unless it was my only option of buying in London, then very, very, very in-depth look at who the freeholder is, specialist lawyer to decode all the rules, regs, and hidden costs.

Bucket loads of alcohol to deal with it all.

@pacer142 thank you, those points are exactly what my family mention and in that case I must honk quite carefully then!

I would try VERY hard to find something freehold, even if it was much smaller and another tube stop out.

Honk honk, blinking typos, think!

If you are looking at flats, most lenders won't lend on a freehold flat. So you are going to have to buy a leasehold flat I presume if you want a mortgage.

Buying a flat necessarily means there has to be a Management Company as you do want to make sure the whole building is being insured, that it's being maintained correctly etc

In central London there are lots of blocks of mansion flats which are very well maintained with big management companies - in these alterations are less likely to be an issue (in that you just won't be able to do much at all) but you'll be paying a hefty service charge and ground rent.

The key leasehold properties to avoid completely are the houses where there are two leasehold flats without a share of freehold.

I live in a 2 bed leasehold flat with large outside space in zone 2 which is worth £650 - £700K. No chance of a freehold house at all at that price I'm afraid.

I agree with PP not to buy a leasehold flat that is one or two in a converted house but to check out older well managed blocks.

Avoid new build like the plague - pokey room sizes and all look the same inside plus the price of new build (there are so many unsold ones currently) is that they will likely devalue due to oversupply in parts of London.

Thanks all. It’s all making much more sense and definitely narrowing down my search!

Looks like the commute shall remain and probably stick with commuter towns and aim for a freehold then!

Actually can anyone tell me what share of freehold means?! I mean obviously you get a share but what are the consequences of the leasehold but then, would you end up with the same issues just a percentage of them instead?

Some really inaccurate advice here.

It really depends on what you are buying. If you are looking at a leasehold house, which is quite common particularly for pre-war/inter-war houses, the lease is usually 999 years and you usually have to pay a fixed yearly sum (ours is £4 a year!) and you'll never be asked to contribute to works (as you would in a flat). You may, depending on your lease, have to get permission for an extension (think our management company charged £150) but other than those nominal admin type charges, it's not very different to owning a freehold house. Obviously you need to check the position but that's the general gist.

If you're looking to buy a leasehold flat, then as pp have said, the length of the lease will generally be shorter and you may have to pay to extend the lease if it gets close to only 80 years left. You'll also have a service charge to pay and could be asked to pay for significant repairs / works.

namechanged I've lived in London all my life and not encountered leasehold houses here - they may be common elsewhere but here they are generally freehold.

Interestingly some new build houses are leasehold and to be avoided like the plague - unscrupulous developers sell on the freehold after the houses have been sold to unsuspecting homeowners and the new freeholders up the ground rent by ridiculous amounts. I think the government plan to stamp this practice out.

Share of freehold is exactly that OP - everyone who has a flat in the building has a percentage share of the freehold and therefore you all share the management decisions for the building rather than a managing agent appointed by a freeholder of a leasehold property does. SoF also means there is no ground rent to pay to the freeholder as you are the freeholder IYSWIM

Share of freehold flat in Hackney/Bethnal Green

Thanks @tethersend I’m wondering after this thread if this is one of the flats in houses that pp have said to avoid. I will assume the share of freehold allows you more control but I am a bit wary now.
I do like that though.