Guide to buying
Guide to Buying Property in England & Wales
Discover everything you need to know about freehold, leasehold, and other property ownership types before purchasing a home.
Ways to Own a Property
In England and Wales, there are two main types of property ownership: freehold and leasehold. Understanding the difference between the two is important before buying a home, as each offers different rights and responsibilities.
Freehold
Owning a freehold property means you own both the building and the land it stands on outright, for an unlimited period of time. You are fully responsible for maintaining the property and the land it occupies.
Most houses are sold as freehold, although not all. Freehold ownership is generally preferred because it is simpler and more straightforward than leasehold.
Leasehold
A leasehold property gives you the right to occupy and use it for a set period of time, as specified in a lease agreement. Leases typically range from 99 to 999 years, after which the ownership reverts to the freeholder unless the lease is extended.
Leasehold ownership is most common for flats and apartments, where the freeholder owns the building and the land it stands on and grants leases to individual occupiers. However, some houses can also be leasehold.
The lease outlines the responsibilities of both the freeholder (also called the landlord or lessor) and the leaseholder (also called the tenant or lessee). These often include paying an annual ground rent and a service charge. Ground rent is usually a modest annual fee, often between £50 and £300, but this will depend on the specific terms of the lease.
Service charges cover the maintenance of communal areas, building insurance, and management costs. When you buy a leasehold property, you are effectively purchasing the remaining term of the lease from the seller. Mortgage lenders typically require at least 70 years remaining on a lease before they will agree to lend.
Service Charges
If you own a leasehold property, you will usually need to contribute towards the running costs of the building. These costs typically include:
- Buildings insurance
- Electricity and heating for communal areas
- Cleaning of shared spaces
- Repairs to the structure and exterior
- Property management and administration fees
You can find more information about buying a leasehold property on the
UK Government website.
Sinking Fund / Reserve Fund
In some cases, leaseholders can join together to purchase the freehold of their building. Each leaseholder then owns a share of the freehold, while still retaining their individual lease. This arrangement gives owners greater control over maintenance decisions, running costs, and lease extensions.
Share of Freehold
Over time, buildings need maintenance, upgrades, and occasionally major repairs such as roof replacements or external painting. To help manage these costs, leaseholders often contribute to a reserve fund or sinking fund.
A reserve fund is used to cover unexpected or irregular costs, while a sinking fund builds up over time to pay for large-scale works. The lease will state how these funds are managed and how much each leaseholder must contribute, usually as part of their annual service charge.
Commonhold
Commonhold was introduced in 2002 as a modern alternative to leasehold. In a commonhold arrangement, flat owners collectively own the building and land through a Commonhold Association. Each owner has permanent ownership of their flat, without a time-limited lease.
Although it offers more control and transparency, commonhold has not become widespread, and most properties in England and Wales are still sold under traditional freehold or leasehold ownership structures.
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