Blog Post

Property Advice: Understanding Different Types of Tenure

Andrew Lee & Co • Dec 19, 2023

If you’ve ever looked on property portal sites to find your next home, then you’ll have likely noted that many of the properties that come up in your search may show different types of tenure - namely freehold, leasehold and shared ownership.

If you’re a first time buyer or have only experienced one of these three types of tenure, then you may not be fully aware of the differences between each. In this brief guide, we’ll explain these differences to you, allowing you to make a decision on which may be best suited to your current situation.

Freehold

When buying a property, freehold is typically the type of tenure that you’ll be looking at. This means that you will own the property and all the land associated with it for as long as you choose (i.e. before selling it again).

This will involve you making an offer to the seller, instructing a housing solicitor to manage the transfer of the contracts and property deeds for you and putting down a deposit to take out a mortgage, unless you are in the lucky position to afford to buy the property outright.

‘To Be Sold with Tenant in Situ’

Some freehold properties are advertised with the condition ‘to be sold with tenant in situ’. If you see this, this simply means that there is a current tenant paying rent/ground rent to the existing property owner, and they will continue to be a tenant to the new owner/investor who buys the property.

Leasehold

Unlike a freehold property, with leaseholds you own the property for a set amount of time (as agreed upon in a contract), but not the land it sits upon. Leasehold agreements can range anywhere from 1-999 years.

These typically differ from rental agreements in that rental agreements tend to be short term while leaseholds tend to be longer term. Because you’ll be owning the property itself, you will likely still need to take out a mortgage to own a leasehold property, although this tends to be more affordable than freehold.

However, you will also need to pay ground rent to the freeholder of the land each month, which is something to take into consideration. Similarly, if you want to make significant changes to the property, such as an extension, then you may need to receive written permission from the freeholder.

Shared Ownership

The last type of tenure that you’ll likely come across when house hunting is shared ownership. The best way to describe this is that it’s a combination of freehold and renting; as its name suggests, you only buy a portion (a share) of the property, while the rest is owned by someone else. You will then pay rent to the other owner, whilst paying a mortgage on your share of the property.

For example, if you bought a 50% share of a home for £125,000, then you would put down a deposit and take out a mortgage against this. You would then pay rent on the remaining 50% of the property, the amount of which would be agreed upon in your contract.

You can also increase your share of the property over time, which we will explore further in our next blog.