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What's the difference between Leasehold and freehold?

What's the difference between Leasehold and freehold?

What's the difference between Leasehold and freehold?

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What's the difference between Leasehold and freehold?

Homeownership or property ownership normally do come in two forms which are the freehold and leasehold. Every potential homeowner or property owner is required to understand the difference between the two before going ahead to buy a home or property because they both have different prices and different responsibilities. 

difference between leasehold and freehold


 

What is Freehold?

Freehold is a legally recognized right to "own" the title of real estate i.e. the land and all the buildings thereon. It also includes all other immovable properties such as fixtures and movables such as furniture, carpets, mirrors, appliances, fixtures and so on. Freehold title gives the owner the right to do whatever they want with their home without any interference from any other party.

Freehold is also considered absolute ownership. The title deed remains with the property eternally unless someone pays for its transfer. Freehold ownership has to be earned through a purchase/purchase agreement and not leased. However, to earn such rights one must pay for it.

What is a leasehold?

A leasehold is an agreement of "renting" the title of real estate i.e. the land and all the buildings thereon for a period of time. The rental period can be decided by either both parties or by some other third-party service company. The temporary owners are normally expected to pay for the whole period of time regardless of whether they wish to continue to stay in the property or not.

A leasehold title gives the owner some protection and security of tenure and can be sold or transferred like any other property. The title deed remains with the property only for the duration of the agreement.

What are the differences between freehold and leasehold title?

1. Freehold titles can be earned through a purchase or purchase agreement. One must pay for that right whereas leasehold is normally earned through renting period.

Freehold is also considered absolute ownership while a person is only a tenant when in possession of a leasehold.

Freehold is considered more of security of tenure. A leasehold leaseholder can be evicted from a property anytime during the agreed rental period depending on the grounds listed on the agreement whilst a freeholder has a very strong legal right to own his or her home.

2. A leaseholder usually does not have to pay for a long period of time. A leaseholder will be expected to pay for the agreed rental period only, commonly for about one year.

3. A freeholder must pay for his or her property annually or according to the purchase agreement.

4. A leaseholder can be evicted from the property any time during the agreed rental period depending on the grounds listed in the agreement as stated earlier.

Freeholders cannot be evicted from their homes unless there is a very strong reason for doing so.

5. A freeholder has the right to transfer his or her property title when selling. A leaseholder is not allowed to sell or transfer his or her leasehold property according to the terms of the agreement.

6. A leasehold agreement can be broken off at any time by the lessor (the owner of the property) or the lessee (the person leasing the property) or by both parties together.

A freeholder does not have the right to break off a freehold agreement unless the property is put up for sale or has been condemned or has been taken over by a third party.

The pros and cons of freehold and leasehold ownership

Pros of Freehold

1.  Freeholder has the right of ownership over his or her house forever.

2. Freeholder has the right to transfer their ownership during his or her lifetime. A leaseholder does not have this right unless stipulated by the agreement.

3. A freeholder can put their property up for sale anytime during his or her lifetime. A leaseholder cannot do the same.

4. A freeholder has the right of purchasing back his property after selling it to someone else, but a leaseholder is not allowed to do so.

5. A freeholder cannot be evicted from his property unless it is condemned.

Cons of Freehold

1. Freeholders are required to pay large sums of money to earn the right of ownership over their property. 

Freeholders are also required to pay mortgage fees on the property for as long as they own it whereas leaseholders will only be required to pay rental fees.

2. Freehold owners have to pay taxes on their property annually or as stated in the purchase agreement.

3. A freehold title is difficult to sell on a secondary market without a considerable reduction in price.

Pros of Leasehold

1. A leaseholder will only have to pay rental fees, unlike freeholders.

2. A leaseholder does not have to pay for it when the agreement expires.

3. Leaseholders do not have to pay taxes on their property annually or according to the purchase agreement, unlike freeholders.

4. A leaseholder can sub-lease his or her property to other people.

Cons of Leasehold

1. Leaseholders may have to pay a penalty in case they wish to break off the lease early in the agreement.

2. A leaseholder does not have a legal right to transfer his or her property in case he or she wishes to sell it.


 

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