Freehold, Leasehold or Commonhold?
If the property is freehold, this means that the land on which the property is built is part of the sale and no ground rent or service charge is payable.
A property may be leasehold, which means that the land on which the property is built is not part of the sale. You have to pay ground rent to the owner of the land – who is called the freeholder.
The length of a lease can vary and you should check that the length of the lease on the property you are interested in buying is acceptable to the mortgage lender. In addition to ground rent on a leasehold property, you may have to pay an annual service charge. This usually happens with a flat. The service charge covers such items as maintenance and repairs to the building, cleaning of common parts and looking after the grounds.
A group of leaseholders living in the same building may have a right to jointly buy the freehold of the building or take over its management.
If the property is commonhold, this means that you can buy the freehold of a flat and own common parts of the building jointly with the owners of other flats in the building (known as a commonhold association).
In commonhold a ground rent or service charge is not payable. However, a share of the commonhold association’s expenditure on maintenance, insurance and administration will be.