Which is better, Leasehold or Freehold Property?
I’m sure this question would have popped up many times in your mind if you were deciding which to buy.
Well, it does make a difference between being in possession of your own property outright and having a landlord. There are 2 fundamentally different forms of legal ownership: leasehold and freehold. If you are a homeowner then the chances are that you own a freehold property, which means that you own the property including the land it is on. On the other hand, if you are in an apartment or flat, chances are you own it on a leasehold basis, (that is likely to be the case even if you are sharing the building’s freehold area.) And so what does all this mean and why should it matter to you? Simply put, leasehold and freehold property gives different ownership rights.
It may seem like a technical legal language and one might refer to sites like Yahoo or Channel Asia for better understanding on these matters. However, there are a couple of things which are much more important about your property – whether it is leasehold or freehold. Although real estate agents tend to gloat about this, the difference could be between a property that is worth buying and one that is not. Many buyers do not spend time to analyze this out when they purchase a home and end up regretting it later – getting this wrong can prove to be extremely expensive for you. Here, in this post, I would like to explain the pros and cons of both types of ownership.
Freehold gives the most advantage, with property rights for freehold ownership including the right to occupy the land, erect buildings on the land, earn income from the property/land, sell the land, subdivide the land, lease the land, and use the property/land as security for loan purposes. In other words, this form of tenure gives total unencumbered ownership. Generally, most homes are freehold properties even though some might be leasehold – typically through shared tenure schemes. If you acquire a freehold property, you’re responsible for maintaining your home/property and land, so you will need to budget for these costs way in advance before you decide.
On the other hand, leasehold ownership splits the above rights between 2 parties: those who own the property (“the owner”) and those who lease the land (“the lessee”). The owner retains the full right to the freehold title of the property, and to use the property or land as security, but, the right to an income or returns changes to a right to rental income, while the right to sell may be prohibited. However, all other rights, like loss of occupying, building, subdividing and entering the property get a transfer to the lessee. Most flats and apartments are owned leasehold, aside from in some regions where they’re very few leasehold properties.
You can check reviews of this on sites like Skies 39 Toa New Launch Condo|Tumblr where they include properties available for sale.
With a leasehold arrangement, one owns the property and its land for the duration of your lease agreement period with the owner or freeholder. When the lease expires or terminates, the ownership then returns to the freeholder unless you’re able to extend the lease. Please be aware of the service fees that are included with the leasehold price before putting in an offer on a property as it may impact on whether one can afford to live in there or not. Service charges would include things like electricity bills, maintaining large communal gardens, repair and maintenance of roofs, lifts and exterior walls and these may vary from property to property.
Freehold versus Leasehold: which is best?
Leasehold means that you have the right to occupy a building or property for a set duration of time (the lease period/length), but don’t own the property itself. Typically, you will have to pay an annual ground rent and possibly a service fee but you cannot decide how the property is run or maintained. You may get a say on that, but it is ultimately the freeholder – the owner of the building – who decides what happens. The major advantage of owning freehold property, or possessing a share in the freehold of a building, is that you are either totally in control, or can vote on what happens with the property, but for any service or repair fees, you will be liable for it. Leasehold isn’t necessarily a bad way to own a property but there are stories abound of homeowners who get hit with huge repair bills and high service fees that they struggle to face up to.
The right to manage
You might be allowed to change the management of your leasehold property if you are unhappy with the way it is being run. That could involve requesting a tribunal to appoint a new manager, or applying the Right to Manage. The Right to Manage allows you and the other leaseholders assume certain management responsibilities from the owner or landlord without having to prove bad management. To find out whether you qualify, please contact the local Leasehold Advisory Service or Building Authority for advice. You and the other leaseholders may manage the building yourselves or even opt to pay a managing agent to do it.
Hope this post was useful and would like to wish you the best in your search.