The difference between leasehold and freehold (and what that means for property plans)

When buying a property, be it an investment property, a new family home or a space for your business to operate, you are certain to come across freehold and leasehold in the process. If you're a new buyer and not familiar with these terms, we're here to help. In this article, we'll explain what leasehold and freehold mean, how they're different, what they apply to, and what plans are required for each.

Leasehold versus freehold

Let's start with succinct definitions of the two:

What is leasehold ownership?

Leasehold ownership is when you own the property for a specific length of time, but not the land it's built on. When this time is up and the lease ends, ownership of the property reverts back to the freeholder, oftentimes a landlord. An example of this type of ownership would be when you own a flat but not the building that contains your flat and others.

What is freehold ownership?

Freehold ownership is when you own the property, the land the property sits on, and a small amount of the airspace above it. This means you are responsible for the maintenance of both the land and the property. You'll find that the majority of houses in the UK are freehold.

Information on all registered freehold properties in England and Wales is kept by the Land Registry, along with the details of leases for leasehold properties (if they're held for seven or more years). To learn more, read our informative article about the Land Registry, what it's for, and why it's important.

Why do leasehold and freehold require different property plans?

The majority of leasehold and all freehold ownerships require property plans for Land Registry records, but the types of plans for each are different.

What is a lease plan?

Lease plans are for leasehold properties. A lease plan is an accurate drawing that outlines the exact demised area included in a lease. This plan needs to include a floor map of the property and its levels, the leasehold boundaries, any associated land such as garages, driveways, and gardens, and be detailed enough that it can slot into an Ordnance Survey map with ease. It is essential that a lease plan is drawn entirely to scale; otherwise, it won't be accepted by the Land Registry. Visit our lease plan service page to learn more about the specifics required within this drawing.

A lease plan is legally required when registering a leasehold when the lease is longer than seven years. Any lease length under 7 years is automatically protected under the Land Registration Act 2002.

What is a title plan?

Title plans are for freehold properties. A title plan is also an accurate, detailed drawing, but this focuses less on internal property details and more on the boundaries of the property, access points, thoroughfares, and whether any watercourses are present on the land. It's essential that this drawing conveys a sense of how the property fits in amongst its surroundings - this is done by outlining specific areas in different colours and shading patterns. Once again, a title plan must be drawn to scale to be accepted by the Land Registry. You can learn more about these plans from our title plan service page.

When do you need a lease plan or title plan?

Because the property ownerships differ, there are some differences in when you may need a lease plan or title plan.

Freehold property owners need (or may need) a title plan for the following:

• Registering ownership with the Land Registry

• Understanding where land boundaries lie

• Settling more granular property disputes that the Land Registry's information database can't solve

• Buying or selling a freehold property so that boundaries can be clarified in the transaction

• Dividing a large area of land or property into smaller plots, either to develop or sell - new title plans for each new area will be required

Leasehold property owners need (or may need) a lease plan for the following:

• Registering a new leasehold with a lease of over seven years with the Land Registry

• Replacing an outdated lease plan, be it due to property changes or the age of the plan

• Converting a freehold property into a leasehold

• Selling your leasehold property for the new owner's clarity

Common mistakes with leasehold and freehold plans

Leasehold and freehold plans, though different, share similar negative outcomes when not created properly.

Issues can arise from using outdated or incorrect floor plans that don't accurately outline boundaries and other crucial details. These kinds of issues include disputes, difficulties settling those disputes, and long delays or even rejections during a sales transaction, which will require resubmittal of the plan to the Land Registry and paying the fees again.

Your title or lease plan must comply with the Land Registry's format to avoid any of the above problems. A certain way to do this is to get your title or lease plan made professionally, by a team of experts, such as ours at Lease Planners. By working with a company that specialises in this area, you should even have the opportunity for them to take the property measurements for you to ensure an entirely accurate plan made to scale and with every detail included.

What is the difference between leasehold and freehold, and why do accurate plans matter?

The difference between freehold and leasehold lies in the type of ownership. If you own the land and the structures that sit on it, it is a freehold ownership. If you own the building but not the land, or own a space within the building, such as a flat or lower floor for a business, then it is a leasehold ownership.

The second difference lies in the plan needed for each type of ownership. For leasehold ownerships, you'll require a lease plan, and for freehold ownerships, you'll require a title plan. These plans are essential, not to mention a legal requirement, for property registration applications, sale transactions, property conversions, clarifying boundary understandings, and settling disputes.

If you're in need of a professional lease plan or title plan, we're here to help. With decades of experience in accurate plan creation, we have the know-how and technology to produce highly accurate and detailed plans in the Land Registry's accepted format. If you have any questions about this subject or would like to talk to us about our services, don't hesitate to give us a call on 020 3637 0150 or 01473 487234.