A guide on freehold property

Home » Welcome to Cozee » Resources » buying property » What is the process of buying a house? » A guide on freehold property

freehold property

In this article, we will be going over what a freehold property is and how they work as well as how to make sure you’re getting a good deal if you’re embarking on a journey to own a freehold property.

How do freeholds work?

Freeholds are a type of property ownership that grants the owner complete rights over the land and property for an indefinite period.

What is the definition of a freehold?

According to the Land Registry, the differences in the main three classes of property are as follows:

  • Freehold: A freehold is an estate in land where the owner has an indefinite and absolute ownership of the property and land. The owner is responsible for the maintenance and upkeep of the property and has the right to sell, rent, or modify the property as they see fit.

Other types of property classes include:

  • Leasehold: The owner has the right to use the property for a fixed period of time, as specified in the lease agreement.
  • Commonhold: A type of ownership where individual units are owned outright, but common areas are owned and managed collectively by the unit owners.

Looking for freehold property in London?

Discover the exclusive deals that Cozee has to offer right now and find an unbeatable deal!

What is a flying freehold?

A flying freehold is a situation where part of a property extends over or under another property.

This can occur when a building is constructed across multiple plots of land or when an extension is built over an existing property boundary.

Flying freeholds are common in older properties or conversions, particularly in densely populated areas.

See an example of what a flying freehold property may look like in the image below with two property owners properties represented by the blue and red outlines:

A flying freehold in the UK

When buying a property with a flying freehold, it is essential to thoroughly research and understand the legal implications.

Get an understanding of how to use the land registry here

While not inherently good or bad, flying freeholds can lead to disputes over maintenance responsibilities and access rights so you should obtain the plans from the land registry that goes of the property’s boundaries as soon as you can.

What is a share of freehold?

A share of freehold is a type of property ownership where multiple individuals or entities own a portion of the freehold interest in a building or land.

This arrangement is common in property types that are common in apartments or flats, where each owner has a share in the freehold of the building and the land it sits on.

The legal documents

When buying a share of freehold, it is crucial to review the legal documents and understand the rights and responsibilities associated with the shared ownership.

This type of ownership can benefit buyers by providing greater control over the management and maintenance of the property, as well as the potential for long-term cost savings compared to leasehold properties.

How do freehold differ in Scotland?

In Scotland, the concept of freehold ownership is known as “outright ownership” or “heritable ownership.” While the principles are similar to freeholds in England and Wales, there are some notable differences due to the distinct legal system in Scotland.

Scottish flag representing freeholds

According to the Scottish Government’s Land Registry, heritable ownership grants the owner:

  • The conveyancing process in Scotland differs significantly as Sellers in Scotland are mandated to furnish potential buyers with a comprehensive Home Report prior to listing their property
  • Conveyancing in Scotland involves formal written offers and acceptances, referred to as missives
Get more information on the buying process in general in Scotland here
  • Scotland operates a land registration system, wherein property ownership is recorded in the Land Register of Scotland

Additionally, the way freeholds are viewed in the country differs slightly as well:

  • Unlike in England, where leasehold issues have arisen, such as houses being sold as leasehold without buyers realising, Scottish properties predominantly maintain the freehold ownership model.

What are the benefits of buying a freehold property as a landlord?

As a landlord, owning a freehold property offers several advantages that can enhance your investment and provide greater flexibility. Here are some key benefits to consider:

1: There is no ground rent 

One of the primary benefits of owning a freehold property is the absence of ground rent payments. Unlike leasehold properties, where you would be required to pay an annual ground rent to the freeholder, freehold ownership eliminates this recurring expense.

a gardener being paid from service charges in a leasehold

However, it’s worth noting that some leasehold properties may offer convenient services and maintenance covered by the service charges like garden maintenance for instance. This could be beneficial depending on your preferences and needs.

2: No restrictions

Freehold ownership grants you the freedom to make alterations, renovations, or extensions to your property without seeking permission from a third party.

Want a property with flexible deeds?

Properties listed with cozee have unrestrictive covenants so buyers have freedom with their investments

This flexibility can be advantageous for landlords looking to enhance the value of their investment or tailor the property to meet the specific needs of their tenants.

3: There is a long term investment 

Freehold ownership is a long-term investment, as you have indefinite ownership rights over the property and land.

While leasehold properties traditionally had a finite lease term, recent leasehold reforms seen here, have extended many leases to 999 years, effectively providing long-term ownership.

For example, Cozee Properties offer leasehold terms of up to 999 years, allowing for long-term investment in areas with high capital appreciation potential.

Get more information on freehold property for sale with Cozee

According to recent data from benhams.com, properties in London areas have grown by 197% since the millennium which is a significant figure that shows how the over time, capital appreciation tends to go up.

4: Greater marketability

Freehold properties generally enjoy greater marketability compared to leasehold properties.

Some potential buyers may be hesitant about leasehold properties due to the associated ground rent, service charges, and potential restrictions so don’t look for these types of properties on the market at all.

a freehold proeprty in the uk

By owning a freehold property, you can appeal to a broader range of prospective buyers or tenants who prefer the outright ownership and flexibility that freeholds offer.

What are the disadvantages of buying a freehold property as a landlord?

While freehold ownership offers several benefits, it’s essential to consider the potential disadvantages as well, especially from a landlord’s perspective.

1: Lower rental yield

One of the primary drawbacks of investing in freehold properties as a landlord is the potential for lower rental yields compared to leasehold properties.

Since freehold properties generally come with a higher purchase price, you’ll need to secure a good deal to achieve the same level of rental yields as leasehold properties.

Looking for deals with high rental yields?

Find properties with the perfect rental yield to suit your investmetn requriements

However, it’s important to note that this is not an absolute rule, as rental yields can vary based on various factors, such as location, property condition, and market demand.

According to recent market data provided by Zoopla in 2023, find the rental yields that are average in your area by looking at the below table:

Region Area Gross Rental Return
North East Middlesbrough 8.52%
Sunderland City 8.50%
Hartlepool Borough 8.31%
Scotland East Ayrshire 9.57%
Scotland West Dunbartonshire 9.15%
Renfrewshire 9.13%
North West Burnley Town 8.41%
Liverpool City 7.57%
Wyndburn Borough 7.47%
East Midlands Nottingham City 7.06%
Mansfield District 6.40%
Boston Borough 6.39%

2: All property maintenance is your responsibility

As the outright owner of a freehold property, you are solely responsible for all maintenance and repair costs.

Unlike leasehold properties, where service charges cover the maintenance of common areas and potentially some aspects of the property itself, freehold ownership means you’ll need to budget for and arrange all necessary repairs and upkeep.

Looking for property management in London?

Cozee are experts in management and can manage your freehold deal stress-free

This can be a significant responsibility, both financially and in terms of time and effort, unless you have the right property management company.

3: There are a greater number of freehold deals on the market

While the abundance of freehold properties on the market can be seen as an advantage, it also means that finding truly exceptional deals can be more challenging.

With a larger pool of options, competition among buyers can be fierce, and securing a property at a favourable price may require diligent research and negotiation skills.

freehold propery in the uk area

If you’re considering investing in a freehold property, it’s advisable to work with experienced real estate professionals who can guide you through the process and provide access to a comprehensive range of freehold and leasehold opportunities, both on and off the market.

Looking to buy or sell your property? Go with Cozee

  • Trusted estate agent
  • More than 25 years of experience combined
  • We help you focus on your objective (investment, 1st time buy)
Skyscrapers of London