Circa London first time buyers guide to buying a leasehold property

Published: 24/04/2024

Understanding the Difference Between a Freehold and a Leasehold Property in Central London

When buying property in Central London, particularly in sought-after areas like Shoreditch, Old Street, Bankside, Southwark, and Bermondsey, understanding the difference between freehold and leasehold ownership is essential. Whether you're working with Central London estate agents or a trusted agency like Circa London Sales & Lettings, having a clear grasp of these property types can help you make a more informed decision.

What is a Freehold Property?

A freehold property means that you own both the property and the land it sits on outright. As a freeholder, you have complete control over the property, including the freedom to make alterations (subject to planning permission and regulations). This ownership is indefinite and doesn’t expire, making it a more secure investment in the long term.

Freehold properties are more common in suburban areas but can still be found in trendy parts of Central London, such as parts of Bermondsey and Southwark, where houses or converted buildings may offer freehold titles.

What is a Leasehold Property?

A leasehold property, on the other hand, involves owning the property for a fixed period (often 99, 125, or even 999 years) but not the land it sits on. The freeholder owns the land, and the leaseholder pays annual ground rent and service charges for the maintenance of communal areas. Leasehold properties are common in apartment buildings, particularly in urban areas like Shoreditch and Old Street, where high-rise developments are more frequent.

As a leaseholder, you have the right to occupy the property, but you must adhere to the terms of the lease agreement, including paying ground rent and complying with any restrictions. The lease term gradually decreases over time, and as it nears expiration, the property’s value may decline unless it is extended. In the case of a leasehold property with less than 80 years remaining, this can be a significant consideration for buyers.

Key Differences Between Freehold and Leasehold

• Ownership: Freeholders own both the property and the land; leaseholders only own the property for a fixed term.
• Control: Freeholders have full control over the property; leaseholders must comply with the lease terms, which may restrict alterations or subletting.
• Duration: Freehold ownership is indefinite; leasehold ownership expires after the term of the lease.
• Costs: Leaseholders typically pay ground rent, service charges, and sometimes a share of the building's maintenance costs. Freeholders have no such obligations.

What to Consider When Buying a Leasehold Property in Central London

If you’re considering a leasehold property in areas like Bankside, Shoreditch, or Southwark, it’s important to consider how the lease length may affect the property’s value and potential resale. Properties with shorter leases (less than 80 years) may be harder to finance or sell, and extending the lease can be expensive.

When working with experienced Central London estate agents, like those at Circa London Sales & Lettings, it’s important to ask about the length of the lease and any ongoing costs, as these factors can impact your investment.

Conclusion

Whether you’re exploring properties in trendy Shoreditch or the vibrant areas of Old Street and Bermondsey, understanding the difference between freehold and leasehold is crucial when making a property decision. With the help of professional Central London estate agents, you can ensure you choose the property type that best suits your long-term goals.

By getting expert advice from agencies like Circa London Sales & Lettings, you can navigate the complexities of freehold and leasehold properties and find the perfect home or investment in Central London.