What Is a Freehold Property?

When navigating the complex world of property ownership, you'll encounter various terms that firstly; you’ve probably never heard of, and secondly can impact your buying decision. One of the terms that pops up often is "freehold" or ‘freehold property.’ But what is a freehold property and what does 'freehold' mean? Understanding what a freehold property is and how it differs from other types of property ownership like leasehold or commonhold, can be crucial for making the best informed choice for you. In this article, we'll break down what a freehold property is, its advantages and disadvantages, and why it might be the preferred option for you.

What Is a Freehold Property?

A freehold property is: ‘type of real estate ownership where the owner has complete and absolute ownership of both the building and the land on which it stands.’ This ownership is indefinite, meaning there is no time limit on how long you can hold the property. In essence, as a freehold property owner you "own" the land and the structure outright, with no obligations to any other party beyond standard legal requirements.

Freehold vs. Leasehold: What’s the Difference?

Another term you’re likely to hear is ‘Leasehold.’ Which naturally raises the question; how does freehold differ from leasehold? Here’s a quick overview of the two:

• Freehold Property: You own the property and the land it stands on outright, indefinitely. No ground rents, service charges or lease restrictions apply.
• Leasehold Property: You own the property but not the land. Instead, you have a lease from the freeholder (the person or entity that owns the land) granting you the right to use the land for a specified period. This typically ranges from 99 to 999 years. When the lease expires, ownership of the property reverts to the freeholder unless the lease is extended. For example, this might apply to a flat within a block of flats.

Advantages of Owning a Freehold Property

Owning a freehold property comes with several benefits, making it a preferred choice for many property buyers:

• Complete Ownership: As a freeholder, you have full control over your property, including any modifications or renovations you wish to undertake (subject to local planning laws).
• No Ground Rent or Service Charges: Unlike leasehold properties, where you may need to pay ground rent or service charges, freehold ownership eliminates these ongoing costs.
• No Lease Expiry Concerns: With a freehold property, there's no worry about the lease running out, which can affect the property's value over time as lease renewals under 100 years can get very pricey.
• Greater Market Appeal: Freehold properties often hold their value better than leasehold properties and can be more appealing to potential buyers.
• Easier Sale Process: Selling a freehold property can be more straightforward since there's no lease to transfer, making it a smoother transaction for both buyers and sellers.

Are There Any Downsides to Freehold Ownership?

While freehold ownership is generally preferred, there are a few considerations to keep in mind:

• Higher Upfront Costs: Freehold properties tend to be more expensive than leasehold properties because you're purchasing both the land and the building. 
• Maintenance Responsibilities: As a freeholder, you're responsible for all maintenance and repairs on the property, including the exterior and land. There’s no landlord to share the burden.
• Insurance Responsibilities: You must arrange and manage building insurance for the entire property yourself, ensuring it covers the full reinstatement cost. This adds another layer of responsibility and potential cost.
• Availability: In some urban areas in the UK, leasehold properties are more common, particularly with flats and apartments. Finding a freehold property might be more challenging in these regions and come at a much higher price point.

Understanding Property Ownership: Insurance Responsibilities

When purchasing property, the type of ownership you have—whether it’s freehold, leasehold, or commonhold—affects your rights, responsibilities, and financial obligations. One key responsibility, no matter the ownership model, is ensuring the property is adequately insured. Let’s take a look at the different ownership types and the responsibilities that come with it:

Freehold Property: Full Ownership and Insurance Responsibilities

As a freeholder, you own both the property and the land it stands on outright. This means you have total responsibility for arranging the necessary building insurance to protect the structure of your home.

Leasehold Property: Landlord Responsibility for Buildings Insurance

As a leaseholder, while you own the rights to live in the property for the length of your lease, the freeholder (landlord) retains ownership of the land and building. Typically, the freeholder will arrange building insurance and pass the costs on to you through service charges.

Commonhold Property: Shared Ownership of Communal Areas

If you own a flat under a commonhold structure, you hold the freehold of your individual unit but share responsibility for communal areas. This could include stairwells, roofs, or gardens. While you must arrange insurance for your own flat, the commonhold association is responsible for insuring the shared parts of the property.

Why a Rebuild Cost Estimate is Important for Freeholders and Commonholders

If you own a freehold or commonhold property, it’s important to make sure your insurance covers the full cost of rebuilding your home in the event of the worst case scenario. Over time, construction costs can change, and if your property is underinsured, you could face unexpected financial difficulty if something goes wrong.

That’s where a rebuild cost estimate comes in. It ensures your property is insured for the right amount, so you don’t have to worry about being caught short. And if you’re a leaseholder, it’s a good idea to check with your freeholder to ensure they have adequate building insurance in place, so the entire property is well protected.

Get in touch with us today to arrange a rebuild cost estimate to make sure your property is fully insured for the correct amount.

Freehold Property FAQs

1. Can I convert a leasehold property into a freehold?
   Yes.  In some cases it is possible to purchase the freehold from the current owner through a process called "leasehold enfranchisement." This typically happens when a group of leaseholders, such as those in a block of flats, join together to buy the freehold interest from the landlord.
2. Is freehold ownership common in the UK?
   Yes, freehold ownership is common, particularly for houses. However, flats and apartments are often sold as leasehold because the land on which the building stands is shared among multiple owners.
3. Can freehold property ownership be passed on to heirs?
   Yes, freehold property can be included in your estate and passed on to your family, making it an attractive long-term investment for families.

Conclusion

This has hopefully given you an overview of 'what is a freehold property' and what the different types of property ownerships are. Owning a freehold property offers a level of security and control that leasehold properties cannot match. With no lease to worry about and full ownership of both the building and the land, it's an appealing option for many property buyers. However, this also comes with the compromise of managing the higher upfront costs and maintenance responsibilities against the benefits.

Understanding the differences between freehold, leasehold, and commonhold ownership is essential for making the best decision for your needs. Regardless of your property type, ensuring you have accurate insurance coverage is crucial. If you require an accurate rebuild cost estimate for your property, we’re here to assist.