What is the difference between leasehold and freehold?

In 2019-2020, 68% of leaseholds were flats. But what is the difference between leasehold and freehold property ownership? Well, when you buy a freehold property, you will own the building and the land it’s on. With a property leasehold, you own the building for a prescribed number of years and not the land. 

Here, we at CIA Landlords go and take a further look into the difference between leasehold and freehold properties for landlords. 

The benefits of a leasehold property

The majority of flats in England are leaseholds, which means you own the flat and not the building itself or the land it’s on. What are the advantages of buying a leasehold flat? Let’s take a look.

The benefits of having a leasehold property as a landlord include

• Lower initial costs when you purchase the property – leaseholds tend to sell for less than freeholds
• The freeholder will be responsible for the maintenance of the building and communal areas, not you
• Having a long lease, for example, several hundreds of years will help to protect your rental property’s value.
• It can help you to expand your property portfolio.

On the other hand, there are downsides to owning a leasehold property. For instance, getting a mortgage from a lender for leasehold properties can be more challenging than freeholds.

Benefits of freehold vs leasehold

The respective rights and obligations of the leaseholder vs the freeholder are laid out in the lease agreement. There are some clear benefits of being the outright freeholder who owns the property and the land it’s on. 

Key benefits of having a freehold flat as a landlord include

• The freedom of owning the property and the land it comes with
• The property going for a higher value should you decide to sell it on
• The extra income you can earn through ground rent paid and service charges from the leaseholder 

The importance of landlord insurance for flats

Landlord insurance is fundamental to protecting your property investment. Whether you are a leasehold or freehold landlord, you don’t want the value of your property to deteriorate due to damage, vandalism, or any other types of malicious damage.

If you own the freehold, it is your responsibility to take care of any wear and tear in the property and the land it’s on. However, if you own a leasehold flat that’s in a block, you are not liable for the wear and tear of the building and its communal spaces.

At CIA, we work with the best insurance providers around to offer extensive landlord flat insurance that covers most things. Are you looking to buy a flat and rent it out at a later date? Look no further than our expertise here at CIA Landlords. 

Now you have read about the difference between leasehold and freehold, does landlord flat insurance sound like something you need? Get in touch with CIA today by calling us on 01788 818 670 or sending an email over to info@cia-insurance.co.uk.