If you’re planning to buy a commercial or residential property, it pays to know about the different types of property ownership and the benefits and implications they bring. The two most common forms of property ownership in the UK are freehold and leasehold, although commonhold is also widespread in Scotland.

Here we discuss what a freehold property is, the types of properties it typically applies to, and what to keep in mind when searching for commercial freehold property for sale.

Understanding freehold property

If you own a freehold property, you own the entirety of the building itself and the land it sits on for as long as you wish. There are no time limitations and you have complete ownership of and responsibility for every part of the property. You must maintain the property yourself and can extend it and make alterations as you see fit, subject to planning permission and building control regulations.

What types of properties are usually freehold?

Most properties in the UK are freehold, with around 80% having this ownership structure. Most freehold properties are houses, with only around 8% being leasehold. Most of the estimated 5 million leasehold properties in the UK are flats. That’s why major cities, where flats are common, usually have a far lower proportion of freehold properties than smaller towns and rural areas.

Commercial property can also be owned on a freehold or leasehold basis. Owners of freehold commercial property have more flexibility than those with a long lease as they own the property outright, including the land. That allows them to expand and alter their properties to meet their needs. Freeholds are common when buying a standalone commercial property, while long leases are typical when purchasing an individual unit within a larger building.

Freehold vs. leasehold property

Generally speaking, freehold is the preferred form of ownership because it gives the owner full control of the property and land for an unlimited period. They are not reliant on a third party to maintain it and there’s usually no service charge or ground rent to pay.

If you have a leasehold property, you own the individual property but not the building it sits in or the land it’s on. You’ll have to abide by the terms of a lease that can place restrictions on how you use the property. The lease also runs for a set number of years (although you may be able to extend it), after which point, ownership returns to the freeholder.

The owner of the building and land (the freeholder or landlord) is responsible for maintaining the external structure and common areas of the building. In return, the leaseholder pays them an annual service charge or maintenance fee. You will also have to seek permission from the landlord to make alterations to the property.

What is a share of freehold?

Another form of property ownership is a share of the freehold. Far less common than freehold and leasehold properties, a share of freehold occurs when a group of leaseholders collectively buy the freehold of the building their properties are in.

This type of ownership gives them more control over how the building is run and the service charge and ground rent. However, they must collaborate with the other freeholders, which can lead to disputes.

Why do I pay ground rent on a freehold property?

As you own the land and building in a freehold property and are solely responsible for its maintenance, there’s typically no ground rent or service charge to worry about. However, some freehold properties can be subject to charges.

For example, freehold commercial properties on an estate with shared common areas may attract a ground rent or service charge. That’s because the developer often retains ownership of the shared space and charges a fee for its upkeep.

If you are considering buying a freehold property with a charge attached, you should take the time to understand how the charge is calculated and the mechanisms in place to control it.

What is a deed of variation on a freehold property?

When you find a commercial property you would like to buy, there may be provisions within the original deeds that you, your solicitor or your mortgage provider want to change. It may be possible to vary the provisions in the original deed using a deed of variation. That can occur with freehold property, although it’s more common in leasehold transactions.

Examples of when a deed of variation is commonly used include correcting omissions in the original deed, making changes to the selling price or altering the completion date if the buyer or seller is delayed. The deed of variation ensures these changes are documented.

Where can I find freehold commercial property for sale?

If you want to buy freehold commercial property, a good starting point is to search online. That will give you an idea of the market in your area and the opportunities that might be available. For example, at Eddisons, we have hundreds of freehold commercial properties for sale, including very niche properties, that you can search by location, size, price and sector.

If you cannot find what you are looking for online, contact a sourcing agent. They will help you identify a property or land that meets your budgetary, location and investment requirements. When choosing a commercial property agent, make sure they’re a member of an accredited trade body, such as the Royal Institution of Chartered Surveyors (RICS). You should also find an agent that specialises in the particular property type or sector you’re interested in.

How can I find freehold land for sale?

Land can be a lucrative investment if you have some knowledge of the market and know what you’re looking for. Due to the complexities of land investment, it’s often advisable to work with a specialist Land Acquisition Agent.

They will be able to advise you at every stage of the transaction, from identifying suitable plots for residential or commercial development and carrying out due diligence to negotiating on price and ensuring your interests are protected.

Make the right move with Eddisons

At Eddisons, our experienced and accredited Commercial Property Agents can help you buy and sell freehold commercial property. Whether it’s industrial units, office blocks, leisure developments, retail premises or land for new projects, we can help you identify the right opportunity. Read more about our commercial property agency, browse our commercial properties and land for sale and get in touch to discuss your requirements with our team.

What is a freehold property?