Tenure - Explanation of Leasehold property and freehold property definition
Freehold property definition
A freehold property is where the owner has complete and absolute ownership of the land, and all buildings that stand on the land. There is no limit of time to hold the property like in the case of leasehold property. A freehold property lies with the title holder unless they transfer it of their own accord. Freehold property insurance will be required.
The owner of a freehold property is therefore in a position to do what they wish to and with the property, in accordance with local planning regulations.
Most house property in the UK is owned on a freehold basis
Leasehold Property Information - Leasehold flats and apartments
Buying the leasehold on a property gives you the right to use the property for a fixed period of time at a given price on the basis of a lease contract. The term of a lease is typically 99 or 125 years, although some properties have a 999 year lease. You do not actually own the property as such, and at the end of the term of the lease the property is returned to the owner.
The owner of the freehold retains ownership of the external and structural walls, and any common parts of the structure such as stairways and is responsible for the maintenance and repair of the building. For a leasehold property insurance for the buildings is usually taken out by the landlord. Most flats and apartments are sold on a leasehold basis, as are a small number of other properties.
As the leasehold is a tenancy, there is a payment of a ground rent (usually a nominal amount) to the landlord. There will also be an annual service charge, payable to the landlord, to cover maintenance and repairs and leasehold building insurance and cleaning of common areas, gardening of grounds and so on. The service charge will also include a management cost. The lease will set out the fraction of the cost or percentage that the leaseholder needs to pay. The landlord must produce annual accounts highlighting expenditure and service charge payments.
Depending on the terms of the lease there may be leaseholder restrictions. i.e. restrictions on what a leaseholder can do with a property, and also on their activities (such as restrictions on noise level) for the benefit of all residents in a building. Although leashold building insurance is taken out by the landlord, if you buy a leasehold property you will be responsible for your own contents insurance.