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Financial Services > Mortgages > Freehold Property > Buying freehold property

Freehold Property - how to buy the freehold

Freehold versus leasehold

In general, the majority of flats in the UK are leasehold, whereas most houses in the UK are freehold.

Freehold usually trumps leasehold for one major reason: control. As the owner, you can mostly do what you wish with your home provided you keep within local planning rules.

It is important to understand the difference between  a freehold and leasehold property, and what rights and responsibilities owning a freehold property gives the buyer.

The freeholder owns the building and land outright, and has control over its maintenance and day-to-day running. 

Freehold property means that the owner has complete and absolute ownership of the land, and all buildings that stand on the land.

A leaseholder on the other hand only purchases the right to live in the property for a set time –typically between 90 and 125 years. Leaseholders usually have to pay ground rent annually which is normally quite cheap and yearly service charges that can add up to thousands of pounds a year.

Freehold property is therefore generally more expensive than leasehold property – but if you buy leasehold, you have the right to buy the freehold further down the line.

Buying your freehold

The law gives a leaseholder two separate rights.

The first is the right to buy the freehold of a building, either individually if you own a leasehold house, or collectively in the case of a block of flats.

A group of leaseholders will need to meet certain requirements to purchase the freehold together.

The process is generally known as collective enfranchisement. Using this route, the group of leaseholders may form a company to purchase the property as a nominee.

Rules regarding the purchase of a leasehold property are subject to the terms of a law called The Leasehold Reform Housing and Urban Development Act, 1993.

This act stipulates that a minimum of half of qualifying leaseholders have to participate in the scheme. Leaseholders usually qualify if they have owned their lease for two years and above.

Therefore, if you live in a building with two leasehold flats, both leaseholders need to participate in purchasing the freehold in order to apply.

If a leaseholder wants to buy the freehold of his house or simply to extend the lease, they need to have owned the property for at least two years at the date of making the claim. However, in an interesting quirk to the legislation, there is no such ownership requirement in the case of a collective enfranchisement claim.

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