What are the differences between leasehold, freehold and commonhold properties?

What are the differences between leasehold, freehold and commonhold properties?

What is a ‘freehold’ property?

Most houses in the UK are ‘freehold’ properties.

This means the owner of the freehold (the ‘freeholder’) completely owns both the property itself and the land on which the property is situated.

With freehold property, the freeholder is solely responsible for the upkeep of the property.

What can you do with a freehold property?

Subject to any local planning regulations, a freeholder can do anything they want to, and within, the building.

A freeholder is also limited by influences that restrict the extent of their property development – for example, the property may be:

a) a ‘listed building’ (a building that has been placed on the Statutory List of Buildings of Special Architectural or Historic Interest) or

b) located within a ‘conservation area’ (an area of special architectural or historical interest, as designated under Section 69 of the Planning (Listed Buildings and Conservation Areas) Act 1990).

With ‘new-build’ properties a freeholder may have to obtain permission from the original developer if they have plans to re-structure the property. This information is contained in a ‘restrictive covenant’.

A restrictive covenant is a promise not to do certain things with the land or property – for example, a promise not to run a business from the property.

Restrictive covenants ‘run with the land’, which means they attach to the land and not the individual owner, continuing over the land even when the present owner sells it to another person.

What is a ‘leasehold’ property?

The majority of flats in the UK are sold on a ‘leasehold’ basis, which means the property is owned for a specific number of years, as set out in a lease – this can be anything from 99 years to 999 years. During this period, a leasehold property can still be bought and sold.

The person (or company) that owns the leasehold property is the freeholder who receives the property when the lease runs its course.

Who is responsible for paying ground rent for a leasehold property?

On a yearly basis, a leaseholder has to pay ground rent to the freeholder for a leasehold property.

Who is responsible for paying service charges on a leasehold property?

The freeholder must make all repairs and maintenance payments for a leasehold property.

What is a ‘commonhold’ property?

The ‘commonhold’ property is a newer form of freehold ownership, which enables freehold ownership of individual flats and houses within a building complex or estate.

Commonhold properties have no landlords. Each resident, or ‘unit holder’, in the property has equal rights. They effectively own their flat as a freehold plus a share in the common structure.

Who is responsible for a commonhold property?

All unit holders are jointly responsible for repairs and maintenance of the commonly owned areas, which are managed by a limited company known as a ‘commonhold association’.

Members sign up to a ‘commonhold community statement’, which lays down all the rules and regulations normally found in a lease, such as rules on having pets. Individual members enforce these rules.

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