Confused about property ownership types in England? You're not alone. Our unique laws can confuse even enthusiastic property seekers. But don't worry! We're here to explain property ownership in simple terms and help you figure out what works best for you.
Let's start with Freehold and Leasehold properties. Think of these as your first stops on the ownership journey. Then, we'll explore other options.
Freehold is like the top level of ownership. It includes not just your home but also the land it stands on. You own it until you decide to sell or pass it on to your decedents. If there's more than one owner or a company involved, it can get complicated. But for now, let's keep it simple.
Now, Leaseholds. These are often linked to flats, maisonettes and sometimes houses. With a leasehold, you own the living space, not the land. You're basically purchasing sole use of a space for a set period of time, like a tenancy agreement on steroids. When you find a leasehold property, ask about the lease duration. Shorter leases can bring some extra complications, but there is a legal framework in place to extend leases, if it is needed.
Leaseholds also involve things like Ground Rent and Service Charges. Ground Rent is a fee you pay to the Freeholder for using their land. Service Charges cover stuff like building maintenance and cleaning shared areas. Some Ground Rents are low, like a token payment (known as a peppercorn rent), but others can increase over time. If the Ground Rent on your dream home is more than just a small fee, you need to know more details of the terms, like if the amount can increase and how often.
Now, let's talk about Leasehold Agreements. The Freeholder takes care of repairs and upkeep and building insurance. You, the leaseholder, will have certain rights and duties too, like not leaving bikes and buggies in the communal halls, hanging washing out of the windows or potentially even keeping pets. Each agreement is different, so read it carefully.
Moving on to Commonhold and Share of Freehold. These are about communal ownership and responsibilities. You have more say and involvement. Share of Freehold means you own the Leasehold on your flat and additionally hold shares in the company which owns the Freehold land and building. Commonhold lets you own your flat as a Freehold and share the common areas with your neighbours within a commonhold association. But there's a catch because if your freehold flat is on top of another freehold flat and not attached to the ground, its considered to be a Flying Freehold. Sadly, many mortgage lenders don't like Commonhold properties as security. Partly because they are less familiar with this type, but also because of the issues that arise from the Flying Freehold aspect.
So lastly, we have the Flying Freehold, which we've touched on above. They don't only crop up in Commonholds. They can occur when a part of your home over hangs, say an alleyway or someone else's land. If it's a small part, it might be okay for a mortgage. But if too much of it is "floating" it can limit your mortgage options.
Long story short? Keep it simple. The more intricate the ownership, the more tangled the legalities. Don't fall for seemingly great deals - they could turn into complications down the line. Your journey to a new home should be thrilling, not bogged down by complexities. Stay informed, make savvy choices and avoid potential property ownership pitfalls.