There is a big difference between freehold and leasehold land. When discussing the differences between freehold and leasehold property, it is vital that you understand exactly what each type of land means. For instance, when you talk about freehold you are talking about the actual parcel of land that is on the property itself. When you talk about leasehold you are speaking about the rights that the tenant has to use the land for a certain period of time. These rights are often times known as ‘common law’.
There are many benefits to both types of land. For leasehold land there is potential for you to build up equity as well as being able to rent the land out at any given time. Many landlords try to take advantage of this because they can increase the value of their property by choosing to let the tenants live in the property. Another great benefit is that some leasehold properties may be eligible for tax breaks. With so many factors to take into consideration it is easy to see why there are so many benefits to leasing versus owning this type of land.
However, there are some downsides to leasing versus owning your own land. The biggest risk with leasehold is that you are not always guaranteed a buyer or tenant for your property. Often times a landowner will lease their land to someone who will then sit for years waiting for their tenancy agreement to expire. At this point the landlord will have to go out and find another tenant to occupy the vacant land. This process is called searching for a new tenant or tenants. This can be very expensive and can be very time consuming.
Also, leasehold property has a limit to how much water or electricity can be flowing to the land. This is because the leaseholder has to pay for all the water or power used. It can also be difficult to obtain permission from the local council for any construction on the land. There can also be many restrictions put onto the land by the lease holder. These restrictions can often include things such as no trees being allowed, or the amount of pesticides or chemicals that can be used on the land.
Another disadvantage to leasing is that many tenants will not wish to buy into a leasehold property. For one reason or another they will prefer to buy their own home. If a leasehold home is purchased by someone who wishes to live on the land, they may have a difficult time selling it off at a later date. This is because the current tenants will not be able to resell it to someone else if the home’s value has dropped drastically.
If you are planning to buy a leasehold property, you should be aware that many landholders do not wish to sell their land to potential tenants. This means that it will be very difficult to get tenants to move into the area if you have chosen to buy leasehold. Landlords may also have to put in extra work to advertise the property so that people looking for a place to live can find it.
Freehold on the other hand does offer freedom for the landholder. The person owning the freehold can choose to let the land go, so that the individual does not have to pay rent each month. It is also the case that some landholders will only allow certain individuals onto their leasehold properties. This may be to prevent overcrowding on the property.
Freehold however is generally seen as more secure. Some people may prefer to purchase their own home instead of renting. Some leaseholders may be paying huge amounts of money in rent each year. They may feel that they would be better off if they could buy their own piece of land and begin to build their own home instead of having to rely on the money from a mortgage provider can give them. With leasehold land there is usually a period of time during which a person can live in it before they have to move out.