Freehold or Leasehold – Know what you buy before you buy! |

(Written by Joshua Yam - Partner at Spencer West)

Land ownership in England and Wales is a complicated topic with many technical differences and subtleties.  The main two types of title are ‘Freehold’ and ‘Leasehold’.

A Freehold title can be understood as an absolute ownership of land whilst a Leasehold title is a right for the leasehold owner to use a property (or land) for a set number of years (usually 125 years or 999 years) and this use is subject to compliance with certain obligations (such as paying an annual ground rent and/or service charge).  

On a basic level, Leasehold titles all originate from a Freehold title.  But there are variations and permutations to this and there can be other more complex legal structures.

So if you have a leasehold title for a property, you do not own the land itself.  You effectively only have a right to use the property and land.  The land and property itself still belongs to the freeholder.  

The exact obligations and extent of liability associated with the land or property ownership will be set out by a formal legal document.  For a freehold title, this is a ‘Transfer Deed’ and a ‘Lease’ for a leasehold title.  

A lot of clients would therefore assume that a freehold title is less complicated than a leasehold title but this is not necessarily the case.  Depending on the nature of your property and the land in question, a freehold title may contain characteristics similar to a leasehold title.

For example, if you are purchasing a new build freehold house which sits within an estate, you will often find that the freehold title carries similar restrictions and obligations to a leasehold property.  Furthermore, if there are common areas within the estate which are managed by a management company, you may also find that there are annual contribution payments required of you (similar in nature to a leasehold service charge).

8 Key Questions When Reviewing Legal Title

Some of the questions which a solicitor acting for a purchaser will check in relation to land and property title includes:

  1. Does the key legal document for the property correctly identify the exact area of land you own?
  2. Does the key legal document provide the property owner with sufficient legal rights to allow you to use and enjoy your property?  This is not just rights above ground but also includes rights underground such as rights for your property to connect to underground drains and sewers;
  3. What restrictions are imposed on your use of the property (i.e. are you allowed to run your business from the property)?  
  4. Are there any annual payments required?  If so, to whom are you required to pay?
  5. If there are annual payments, does the key legal document set out clearly the services that are being provided and are the payment terms legally acceptable?
  6. Would the legal provisions set out in the legal document be acceptable to a bank or mortgage lender?  If not, what will be the best way to resolve or correct the defect?
  7. Are there any Land Registry restrictions attached to the land title?  If so, do we have clear information on the legal procedure required to deal with the restriction and also what fees are payable?
  8. Are there any historical entries on the title pre-dating the construction of the property in question?  If so, are we clear what these entries are and are there any legal risks which need to be addressed or which you need to be aware of?

Every land and every property is different so the above list is by no means exhaustive.

Value of having an Experienced Solicitor to Represent You

As such, whether you are looking to buy or you already own a property in England and Wales, it is vital that you understand your rights, obligations and potential liability.  Having an experienced solicitor who can not only identify potential legal issues but also communicate and explain technical legal topics to you in a simple and clear manner is important to avoid potential future complications, issues or financial loss.  

Joshua Yam at Spencer West solicitors is a residential property Partner with over 13 years’ experience in the industry and specialises in assisting Asian clients (especially from Hong Kong) with residential property matters in England and Wales.

If you require legal assistance with a residential property transaction (including purchases, sales, transfer of equities, refinances), do contact us for a free consultation and fee quote.

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