Following on from last week’s article and my marathon break from the blog – I’ve had some interesting queries around freehold and leasehold property. I have written about this subject in the past (click HERE for the previous article) however, the theme I’ve noticed amongst my blog reading friends requests is…’which one is the more beneficial?’
In total there are 23.36 million properties in England and Wales with 64% being of owner occupied tenure and 36% being rented (includes both the private and social landlords).
Over nine out of ten of those English and Welsh owner-occupied properties are a whole house or bungalow. Now, most people would assume they would be freehold – however, of those renting nearly half of rental properties, 44% to be precise, lived in other leasehold apartments and flats.
It might be wise to quickly explain the difference between freehold and leasehold… When someone owns the freehold of a property they own it outright, including the land it is built on, whilst with a leasehold property the leaseholder owns the property for the length of their lease agreement. Leaseholders pay the freeholder ground rent and other fees. When the leasehold ends, ownership returns to the freeholder although, the leaseholder can extend the lease or they can buy the freeholder out, but there are rules, regulations and processes with regards to doing that.
Therefore, it would be safe to assume that houses are freehold and flats are leasehold… wouldn’t it? Not necessarily!
Most houses are freehold but some might be leasehold – usually through shared-ownership schemes – but more and more new house builders are selling houses on a leasehold tenure as well. The protection of the law afforded to leaseholders who own a flat is substantial, but sadly lacking to leasehold houses sold privately.
Looking specifically at the figures for Walsall, at the last count in WS1 there were 9,877 properties. Since 1997, 5,823 properties in WS1 have changed hands and have been sold. Looking further at those 5,823 transactions in WS1 since 1997, using data from the Land Registry, 16.01% (932) have been leasehold (higher than the national average of 15%).
I am a little concerned about a few new homes builders selling new houses (not flats – houses) as leasehold. There has been a growing trend for new-build houses to be sold as leasehold in recent years. Admittedly not all house builders use this model but those that do maintain it helps make developments financially viable.
So what’s the problem I hear you ask…? It comes when builders sell the freehold separately to an investment company without informing the leaseholder – which they are legally allowed to do! In England and Wales, the “right of first refusal” to buy the freehold is written in law to leaseholders of flats i.e. the freeholder must offer it to the leaseholders of all the flats of the building first), but not leaseholders of houses. This leads me onto the point I’m trying to get across…
…If you are buying a new home and it’s a house (i.e. not a flat) – please check very carefully indeed whether its freehold or leasehold. If it is a leasehold, whilst you do have rights, they are not as strong as for those people buying a leasehold flat.
I appreciate I am only talking about a very small percentage of the property market, but potentially this could end up costing thousands of pounds to those affected.
If you wish to discuss the Walsall property market or just have a natter, call me, email me or let’s meet up!
Phone: 01922 311016