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UK: Lease Hold vs. Free Hold

Last night Carey and I watched an international edition of "House Hunters." It featured some guy living with his girlfriend while looking for a small flat or home in the UK somewhere near her.

The show explained that there are two options for home ownership in the UK: "free hold" where you own the house and the land and can do as you please, and "lease hold" where you are technically leasing the land for something like 120 years and cannot make any big modifications to the house or land without consent of the true owner.

Carey and I thought that the Lease Hold may be a ripoff, but on second thought, I thought that it might be similar to renting with the benefit of building equity.

So what's the truth? Any UK readers (I know you're out there - you've responded to the "leave the car running" post), what's the real story? How's the whole free/lease hold system work? I'm curious.

4 Responses to "UK: Lease Hold vs. Free Hold"

  1. Hmm, the leasehold sounds curious, but how much equity could you build if it is losing value each year? The Wikipedia entry provides a little more info than in your post.

    We actually have something closer to what you are describing here in the US in the form of Community Land Trusts. You buy the house, but lease the land, typically for 99 years renewable (which is I believe the longest lease you can have under US contract law). The lessee builds equity in the house, so it is far better than renting, but the lease with the CLT controls the amount that they can sell the house for and is usually tied to a formula to keep it affordable, for example indexed to the median yearly salary of the area for a family of four. That way it is still affordable indefinitely into the future for the same segment of the population, usually with salaries 30-20% below median. The lease also gives the CLT first-sale rights and can be used to enforce covenant-style regulations. Any major changes to the house usually require lease-holder consent, as in the leaseholder model.

  2. Sorry I'm over a year late posting this, but I only started reading this blog today.

    Leaseholds typically don't lose their value each year, in the eyes of most british people the two ownership methods are equivalent.

    Usually leaseholds are used for properties like flats and appartments where one building contains a number of "properties". Freeholds tend to be for houses. If you think about it this makes sense, as flats etc have more communal areas and shared resources etc. So the ground rent collected by the property company is used to pay for the maintaince of these communal areas. Obviously you wouldn't be able to make large modifications to a flat due the detrimental effect you would/could have on your neighbours.

    Leaseholds on houses are around but they are quite rare (usually if your house is on some land owned by the local aristocracy 🙂 )

  3. i must be one of those rare persons, because my lease has 900 years left !

    having just received my demand letter , for the princely sum of ......... wait for it..... £3.65p , that is right 1p per day!!! i ask myself , is there any added wealth to be made by being freehold?

    if i was to buy this leasehold , what benefits could i gain? let me tell you what my local aristocracy(wales/uk) want, for this leasehold is £3285 !!!

    i know, i will give them a wake-up call . my boundary wall is in need of repairing. i would do it myself normally, but they could send stone mason for a change. i wonder how long, it will be before the maintance man appears...........

  4. What happens when the lease runs out?

    Are you evicted? Do you have any equity left?