What Is A Leasehold Property And What Is Changing About Them?

When it comes to buying property, there are some complex aspects of ownership that are most easily navigated with the help of a local estate agent well-versed in the area that can help steer you away from the potential pitfalls associated with the property market.

One particularly complex issue, one that has been the subject of recent changes in the law, is the concept of leasehold as opposed to freehold, which has trapped people in homes that they have found serious difficulties selling but is also often misunderstood.

The basic difference between a leasehold and a freehold is that whilst a freehold means that you own the land and the building you buy until you choose to sell it later, a leasehold only gives you ownership of the building itself for a number of years set in the lease agreement.

Generally, flats are sold under the leasehold model, although shared ownership homes are often sold as leaseholds as well, so it is important to investigate before buying a property.

Leaseholding is much closer to renting, and because the expiry of the lease means that the property falls into the hands of the landowner. It also can involve additional fees being owed to the freeholder, although ground rent was banned in 2022 for new leases.

The biggest concern is time; any leasehold that has less than 80 years available on it is considered to be essentially unmortgageable, meaning that it can become very difficult to remortgage certain leasehold properties.

A lot of this is set to change however once the new reform law comes into effect.

All leaseholders will be able to extend their leases by 990 years, effectively making them freeholds, there will be a cap on lease extension costs, and the two-year waiting period to extend will be scrapped.

As well as this, many legal processes associated with leaseholding will be made more transparent, helping address poor practices within the industry.