Leasehold vs freehold explained

If you buy a house in England and Wales, you will normally own the building and the land beneath it outright. That is freehold. If you buy a flat, you almost always own a long lease, a right to occupy the home for a fixed number of years, while someone else owns the building and land. That is leasehold, and it comes with costs and obligations that have caught out many first-time buyers.

This guide explains how the two forms of ownership differ, what to check before buying a leasehold home and how recent reform affects you. The rules described are for England and Wales; Scotland and most other countries work differently.

Freehold: simple ownership

A freeholder owns the property and land indefinitely. You are responsible for maintaining and insuring the building, and you may alter it within planning rules and the terms of your title. There is no landlord to ask for permission and there are no service charges, although some estate homes carry a modest estate rentcharge for shared roads and green space.

Houses are usually freehold, but not always. Some new-build houses have been sold on long leases with escalating ground rents, an issue that attracted extensive criticism and is the target of recent legislation. Always confirm the tenure with your solicitor, whatever the property type.

Leasehold: a long tenancy with ongoing costs

A lease sets out a fixed term, often 99 or 125 years when granted, though many older flats have far fewer years remaining. You will normally owe a ground rent to the freeholder, a service charge for building maintenance, insurance and management, and sometimes an administration fee when you sell or sublet. Leaseholders may also face contributions to major works such as roof replacement or cladding repairs.

The remaining lease length is critical. Below 80 years, a lease becomes harder to mortgage because the cost of extending it rises sharply with “marriage value”. Lenders often refuse to lend on leases under 70 to 85 years, which limits your pool of future buyers.

• Remaining lease length, ideally over 90 years
• Ground rent amount and any increase clauses, particularly doubling clauses
• Service charge history for the last three to five years and any planned major works
• Management arrangements: who runs the building and whether leaseholders own the freehold share
• Restrictions on subletting, pets, short lets or alterations

Share of freehold and commonhold

In a share of freehold, the flat owners jointly own the building through a company, each holding a share and a lease. This gives them control over management and avoids a distant landlord, though costs still need to be shared and a disagreement among neighbours can slow decisions.

Commonhold is a different structure created in 2002 and rarely used so far. Owners hold their flats freehold and jointly own the common parts through a commonhold association. Government reform in the Leasehold and Freehold Reform Act 2024 and associated plans aims to make commonhold the default for new flats, but the details are being phased in over several years.

Reform and what it means for buyers

Recent legislation has banned the sale of new leasehold houses in most cases, set ground rents on new leases to a peppercorn, and begun to simplify lease extensions and enfranchisement by removing the two-year ownership requirement and raising the cap on non-residential space. Some provisions have started and others await secondary legislation, so check what applies on your purchase date.

For a buyer today, the practical lesson is to price in the lease. A flat with an 82-year lease and a £600 annual ground rent is not comparable to one with 125 years and a peppercorn. Ask your agent for lease details before booking a viewing, and have your solicitor explain each clause that affects value.

Our Manchester and Edinburgh teams can explain the lease on any listing in plain language before you commit to a viewing or survey. Message us from the property page.