Owning Property: Leasehold vs Freehold
When you buy property, the term on your document will determine whether you own those properties in perpetuity or for a period. The terms should specify what and how much to pay and determines what you can do and cannot do with the title document you hold with regards to the property you own. One of the main attractions to Belize real estate is that foreigners own their property freehold, and the country avoids the use of a two-tiered ownership system that is used through most of the Caribbean.
If you want to know the difference is between leasehold and a freehold property, this article will shed light on it. But first, let’s understand the meaning of each one.
What is leasehold?
A leasehold document gives you ownership of property for an agreed period. The agreement is often between the freehold property owner and you, the leasehold owner. Therefore, leasehold is a property where you do not have ownership of, in perpetuity. When the agreed period ends, a leasehold owner is to return the property to the freehold owner who owns the property in perpetuity.
Circumstances surrounding leasehold
However, leasehold title often lasts a long time to give the owner ample time to use the property built on the freehold land. A period of 120 years and 999 years or a longer year may be agreed upon. In the case of leasehold, the freehold owner is often responsible for maintaining the common parts of the property including the staircase, roof, surrounding walls except expressly stated in the leasehold.
In a nutshell, think of leasehold as a tenant-landlord relationship where the leaseholder will be responsible for annual maintenance and insurance fees, and other building maintenance charges. Often, even when freeholder expects the leaseholder to effect some limited changes, permission is often required from the freeholder before carrying out such task.
Failure by the leaseholder to comply with terms of the agreement may lead to forfeiture of the property.
What is freehold?
A freehold is the opposite of leasehold where the owner owns the title including the land and building on it. The freehold owner is responsible for both land and the property on it. Unless in a shared ownership instances, where the freehold owner is not the owner is either the owner is not the owner of the property.
Circumstances surrounding freehold
While leasehold is limited in what they can or cannot do with the property, freehold owner is in no way subject to any limitation. The freeholder is not subject to annual ground rent or any fees for that matter. Although he needs to meet his responsibility of maintaining the property, his non-performance is not subject to forfeiture of the property.
It is expected that a freehold property should have no limitation whatsoever, there may be a time when the situation is different especially with ongoing trends of leasehold properties in new buildings.
Frequent disagreements between freeholders and leaseholders
- Contentious fees: Overcharge complaints against freeholders by leaseholders.
- Improper maintenance issues: Leaseholders often face exorbitant charges by freeholders.
- Compliance issues: Leaseholders may flout the leaseholder restriction agreement.
Whether leasehold or freehold, every property will return to the freeholder after the subsisting agreement. Before you jump at a property, however, make sure to know what your title document contains.