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What is Freehold?

Any estate that is “free from hold” of any entity other than the owner is known as freehold property. As a result, the owner of such an estate has continuous free ownership and can use the land for whatever purpose as long as it complies with local restrictions. Because a sale of a freehold property does not require governmental approval and hence less paperwork, it is more expensive than a leased property.

Freehold property is inheritable, and the property owner’s power to further transfer the property is unrestricted. There is no encumbrance on the absolute title of the property in a freehold property. A freehold is not the same as a condominium, where each unit’s owner pays a maintenance fee. A legal guardian can inherit free and retain the property. The registration of a sale deed can be used to transfer a freehold property.

Freehold property advantages

As the name suggests, freehold property signifies complete freedom. Thus, the owner of the property has complete control over the freehold premises and has no further payments to make, in the form of ground rents, service charges or any other kind of charges that might be in the case of leasehold properties. Thus, the owner knows the exact amount he spends for purchasing the property. A freehold also has no restriction regarding time, visitors and the like. Thus, the owner can do whatever he legally wishes to within his property, without being answerable to anybody else.

Freehold property disadvantages

The only disadvantage of freehold properties is that they are more expensive. Since an individual owns both, the land and the property, to have complete control over it, the cost incurred on it increases. Thus, such properties might be difficult to be purchased by individuals who are used to staying in flats or apartments, where they just own the property and therefore, pay a lower price.

Freehold land title: Meaning

Freehold land title refers to a freehold property title by which the owner of the freehold land owns it for perpetuity (free from hold). In other words, freehold land title ownership has no limit in time for the landowner and its beneficiaries.

Is freehold property an asset?

For income tax filing for businesses, it is imperative to show certain fixed assets which need to be installed like furniture, office building and plant & machinery, etc. While stocks, cash on hand and debtors are considered as current assets, freehold land and building is considered as fixed assets.

Freehold property rights of the owners

There are no restrictions on the right of an owner of a freehold property to transfer it further and it can be inherited. There is no encumbrance to the absolute freehold title of the property and it can be transferred, by registration of a sale deed. When you purchase a freehold property, you also own the land it was built on (freehold land), along with the house itself. If the freehold property is an apartment, the homeowner becomes a shareholder in the freehold property. You have the right to live in the house as long as you wish, and you can also make changes to it.

Freehold land does not depreciate.

Freehold land is not depreciated, because freehold land is assumed to have an unlimited useful life. Other long-life assets, such as land improvements, buildings, furnishings, equipment, etc., have limited useful lives. Since the owners of leasehold assets cannot sell the property, the depreciation is not factored in a leasehold property.

Home loan for a freehold property

Banks are generally more willing to extend a home loan for a freehold property, as compared to a leasehold property. This is because it is considered a safer investment, as the registration of a freehold property is done and it is also expected to increase in value. Banks are also willing to sanction a larger home loan amount for a freehold property with a high market value (where the loan-to-value ratio can be 80 percent of the market value of the freehold property).

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