What are the differences between buying a house and buying a flat? Which is best? Which should you buy if you have a choice?
Of course there is no definitive answer.
There are points for and against each option.
Very often money will be the deciding factor. Comparing like with like, flats are usually – but by no means always – the cheaper alternative.
Here is a rundown of how the two match up…
1. Physical environment
A house will typically be on two or more levels, although there are “true bungalows” on a single level.
A flat is usually on one level, but you can have “masionettes” on two or more levels.
A house may have the benefit of front and back gardens, a garage and, if detached or semi-detached, has distance from neighbours and is probably less likely to be adversely affected by issues of noise or neighbour disputes.
A house will usually be bigger and have more “moving parts”, making it harder and more expensive work in terms of matters such as cleaning, maintenance and repairs.
2. Legal title
However, there is a small percentage of houses with leasehold title. Similarly, it is possible for a flat to have freehold title – but that is very rare.
The legal document setting out the rights and obligations of someone with leasehold title is called a lease.
A freehold title can give rise to one or more leasehold titles. For example, a large house with freehold title could be converted to form two flats with a lease granted in favour of each flat owner.
A person with a leasehold title (a head-lessor) can, if their lease allows, grant a lease (a sub-lease) to someone else (a sub-leaseholder).
If you have a freehold title, you and your successors can use and enjoy the property forever, in perpetuity.
If you have a leasehold title, you and your successors can use and enjoy the lease for the length or term of your lease – typically 99 or 125 years, although it could be as long as 999 years.
3. Summary of main differences
Here is a short summary of the main legal and practical differences between a house and a flat:
A rent charge is the equivalent of a service charge; it arises on some modern housing developments where there are communal areas requiring maintenance and upkeep.
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A property with a freehold title has the most rights, privileges or benefits. The biggest right is the right to use the property in perpetuity. That means it can be passed to future generations if so desired.
Subject to the law, and matters such as planning permission, a house owner with a freehold title is free to use their property as they wish, doing things such as:
- Granting a lease of the entire property
- Splitting the title into two
- Converting to two or more units and granting a lease for each unit
- Changing the use
- Building on spare land.
In contrast, some of the foregoing steps would not be available to a leaseholder, and those that were would almost certainly need the permission of the freeholder.
Further, a leaseholder’s right to use and enjoy the property is limited; it lasts only as long as the lease. Once the lease comes to an end, so does the leaseholder’s right to occupy.
A person with a leasehold title – the position of almost all flat owners – is obliged to comply with a plethora of obligations, duties, rules and covenants.
As well as the obligation to pay ground rent, a leaseholder may have contractual duties to upkeep, maintain, decorate and repair the leased property.
If any such obligation lies with the freeholder, the flat owner – by means of a service charge – will be obliged to pay their charges or costs or the charges or costs of any managing agent they engage.
A person with a freehold title is normally under no obligation to do anything in relation to their property. But in exceptional cases, a freeholder could have joint responsibility with a neighbour or neighbouring property to do certain things such as maintaining or repairing a:
- Wall or fence
- Footpath or track
- Private road.
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6. Running costs
A house owner with a freehold title does not have the financial burden of paying ground rent and service charges every year.
A house owner has a choice as to when to carry out maintenance or repair work to their property.
Typically a flat owner has no such choice. Often they are not responsible for commissioning the work and may be unhappy with its cost or quality.
There are statutory provisions protecting flat owners in respect of service charges and management costs, but they have limitations and flat owners often feel that they are being over-charged or exploited in relation to the management of their flat or the block/development.
7. Investment value
Generally a freehold house will prove a better investment than a leasehold flat.
On purchase, a house is likely to be of higher value and if so will benefit to a greater degree from house price inflation.
- House bought for £200,000 – price doubles after 10 years – value £400,000
- Flat bought for £150,000 – price doubles after 10 years value £300,000.
A house offers a range of possibilities that can significantly increase its value, such as:
- Adding an extension
- Converting to two flats
- Building another house on available land.
These and other value-adding opportunities are unlikely to be realistically available to leasehold flat owners.
A house or a flat? What’s best for you will depend on your financial resources, circumstances and preferences.
One thing is clear, owning a property is better than not owning a property.
If you want a house but can only afford a flat, it is probably not a good idea to sit patiently in “tenant land” – waiting until you can afford the house you want.
If you have a choice what would you buy – house or flat – and why? Please leave your comments below.
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Rebel Property Coach
My website is: www.rebelpropertycoach.com