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Properties Articles

Buyers Ownership Options & How It Affects Value?

When purchasing a property, it is important to understand the types of ownership and how it affects the value and future costs. There are four main types; Freehold, Leasehold, Share of Freehold and Commonhold.

Generally, houses tend to be freehold property, although some recent new homes are being sold as leasehold. Usually freehold means that you own the property and the land that it sits on. You are responsible for the upkeep, maintenance and management of the building. This includes the externals and the affect your property has on the surrounding environment, alike to pollution or tree hazards. Obviously there are costs to owning a freehold property, however, there are also many benefits. You, as the owner, are entirely in control of any decision making regarding your property. There is no service charge or ground rent, and no need to worry about lease extension costs. To prevent great surprise charges after purchasing, any potential buyer should require a land survey to be done prior to finalising. This should detail any issues within the property and the land it is situated on, allowing for the existing owner to pay for the works or reflect these costs within the value the property.

A common ownership type for apartments is leasehold, which is the long term leasing of property from the freehold owner. These agreements can range from anything as little as 20 year lease extensions to 999 lease. When purchasing a leasehold property, it is incredibly important that you are aware of the lease length as this has a large impact on the value of the property. As a lease length becomes shorter, the costs for extending grow higher. When selling a property with such a lease, the cost is reflected within the price as the costs associated with extending can be significant. If a leaseholder fails to extend, the property is returned to the freeholder. Other than the potential costs, a leasehold property is also under restrictions set by the freeholder, alike to pets and subletting of the rooms within the building. A positive of owning a leasehold property is having your property and land maintained and managed for you, at a standard service charge or annual ground rent. 

Some apartments can be categorised as a share of freehold. This is due to leaseholders becoming joint freeholders of the building that their apartments are situated in. Management and maintenance of the building and land is the responsibility of all the leaseholders and the sharing of costs.

Another ownership type is commonhold, although this is not, ironically, very common. All apartments within the building have to be owned freehold and all communal areas are managed by the commonhold association, which is the company owned by the freeholders.