FREEHOLD OR LEASEHOLD

REAL ESTATEFreehold Or LeaseholdMarch 5^th 2021

FREEHOLD OR LEASEHOLD- THE DIFFERENCES YOU SHOULD KNOW BEFORE INVESTING YOUR HARD EARNED MONEY

Homebuyers are often in a dilemma when they come across terms like Freehold property and Leasehold property.

Let's look at what these mean and what are their respective advantages and disadvantages

Freehold Property:

Freehold property is a property that you have purchased and you own complete rights of the same. You are the owner of the property unless you decide to sell it off.

Advantages of Freehold Property

Buyer is the sole owner.

The owner has complete rights on the property and he can do whatever he wants with it keeping in mind the law and order and legalities.

You do not have to worry about a lease running out. The property is yours indefinitely.

You can generate passive income by renting out your property.

Disadvantages of Freehold Property

The maintenance and functioning of the building come under your responsibilities list.

Owning a freehold property in some cases is more expensive than owning a leasehold property.

Leasehold Property:

Leasehold property means the ownership of the land is leased to the developer for a particular amount of time on which the property is built. The period varies from 10-50 years. In a leasehold property, the legal agreement happens with the landlord called a 'lease' that states the number of years the third party shall own the property and under what 'conditions'.

A lease is a contract between the owner and a third party. A lease defines your rights and responsibilities and the period for which you will be given the property. Ownership of property returns back to the owner upon the expiry of the lease period.

Advantages of Leasehold property

Leasehold properties are less expensive.

The owner has a few or no responsibility for repairs and maintenance thus you will be expected to spend for the same.

Provides a home for people with a short-term requirement.

There is a possibility of buying the leasehold property outright, through enfranchisement, or a share of the freehold.

Disadvantages of a leasehold property

Renewal of the term of your lease- Owner enjoys the rights to not renew or extend your lease term

The landlord has control over the amount of service charge costs that you have to pay.

The way you can use the property is subject to conditions of the Lease. For example, whether or not you can have pets and in some places, there are restrictions on you being a non-vegetarian too.

Resale of the property or your ability to get a mortgage may be prevented due to a short lease.

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