When you are looking to buy a property, you will come across the stipulations of leasehold and freehold in your conveyancing process. As they can sometimes be confusing, it’s essential to understand how each affects property acquisition. This guide will take a closer look at the difference between leasehold and freehold conveyancing to help demystify these real estate concepts.
First, let’s start by understanding these two terms:
Freehold: A freehold estate is outright ownership of the land and any building on the property. With freehold, the property owner has the freedom to do as they please, within the boundaries of the law – be it reconstructing the building, landscaping, or letting the land lie idle.
Leasehold: A leasehold estate is the rental of a property for a pre-agreed period, typically ranging from 99 to 999 years. While a leaseholder will own the property, they won’t own the land on which it sits, which still belongs to the freeholder and must pay an annual ground rent to them.
So, what do these terms mean when it comes to conveyancing, which is the legal process of transferring property from one owner to another?
Freehold Conveyancing
Buying a freehold property tends to be a more straightforward process since there are fewer legal complications. The conveyancing process includes:
1. Contract Drafting: The selling party prepares the contract, which includes the property’s specifics and boundary details.
2. Searches and Surveying: Once the draft contract is accepted, your appointed conveyancer is responsible for carrying out searches with local authorities to reveal any planning permissions or restrictions.
3. Signing the Final Contract: After resolving any issues from searches and surveys, both parties sign the final contract, which will then be exchanged with the solicitors on both sides.
4. Completion: Upon signing the contract, completion can proceed. The final balance is paid, and ownership of the property is transferred.
Leasehold Conveyancing
The process for buying a leasehold property can be quite complex due to several additional considerations.
1. Reviewing the Lease: The lease is a crucial document that outlines the rights and obligations of both the lessee and the freeholder. It’s important to thoroughly examine the lease to understand its terms and conditions.
2. Service Charges and Ground Rent: These are ongoing costs for owning a leasehold property, which can fluctuate over time. Your conveyancer should give you clear information regarding these charges.
3. Management of the Property: It is crucial to find out who manages the property and makes decisions on upkeep, repairs, and insurance. This information can be a significant factor when deciding to buy.
4. Lease Extension: Most mortgage lenders require a lease with a specific minimum length. Therefore, you may need to negotiate a lease extension as part of your purchase, which can be a complex process.
Conclusion
In a nutshell, the main difference revolves around the ownership of land. While freehold conveyancing ensures you own the land on which your property is, leasehold means you “lease” or rent the land from the freeholder for a specific period. Beyond this, the complexity of leasehold transactions makes it essential to seek expert legal advice when buying a leasehold property.
However, no matter whether it’s freehold or leasehold conveyancing, it’s crucial you understand the intricacies involved. Fully understanding the costs and responsibilities will enable you to make an informed decision when it comes to this significant financial commitment.
