Leasehold vs freehold: what buyers need to know

Freehold means you own the building and the land it stands on, outright and indefinitely. Leasehold means you own the right to occupy the property for the remaining term of a lease, often originally 99, 125 or 999 years, while a freeholder owns the building or land underneath. Most flats in England and Wales are leasehold; most houses are freehold, though leasehold houses exist and need extra care.

Leasehold isn't automatically bad. Millions of people happily own leasehold flats. But the detail of the lease has real financial consequences, and it's where buyers get caught out.

What leaseholders pay

Ground rent

A payment to the freeholder. For new residential leases granted since mid-2022 it must effectively be zero (a "peppercorn"), but older leases can carry meaningful ground rents, and clauses that escalate, doubling every 10 or 25 years, for example, have caused serious mortgage problems. Lenders scrutinise escalation clauses; some won't lend against aggressive ones.

Service charge

Your share of maintaining the building: insurance, communal areas, lifts, roof, grounds. Typically anywhere from a few hundred pounds to several thousand per year depending on the building. Lenders factor high service charges into affordability, and big planned major works can land as one-off bills in the thousands.

Admin and consent fees

Many leases require freeholder consent (with a fee) for alterations, subletting or even keeping pets. Worth reading before you offer, not after.

Lease length: the number that matters most

The remaining term of the lease drives both mortgageability and value. Most lenders want a healthy unexpired term, criteria vary, but many look for roughly 70+ years remaining at application and a comfortable margin beyond the end of the mortgage term. Below about 80 years, leases have historically become significantly more expensive to extend, and value erodes as the term shortens. A flat with a 62-year lease is hard to mortgage and hard to sell until the lease is extended.

If you're buying a property with a shortish lease, the usual play is to negotiate the price accordingly and deal with the extension, sometimes the seller starts the statutory process and assigns the benefit to you at completion. Get specialist legal advice on the sequencing.

The reform picture

Leasehold law is mid-reform. Ground rents on new leases are already restricted, and legislation passed in 2024 set out further changes, longer standard lease extensions, changes to how extension premiums are calculated, and easier routes to manage or buy the freehold, which are being brought into force in stages. Some elements were still being implemented at the time of writing, so if your decision hinges on a future reform (for example, waiting for cheaper lease extensions), check the current position with a solicitor rather than relying on headlines.

Share of freehold and other structures

Share of freehold means the flat owners jointly own the freehold, usually through a company, and grant themselves long leases. You still technically own a leasehold flat, but you control ground rent and management collectively. Generally attractive, though it relies on the owners actually running the building well.

Leasehold houses deserve suspicion: there's rarely a good reason for a house to be leasehold, and some past developments used them to generate ground-rent income. Check the lease terms very carefully.

Questions to ask before you offer on a leasehold

• How many years remain on the lease?
• What is the ground rent now, and how does it change over time?
• What was the service charge in each of the last three years, and are major works planned?
• Who is the freeholder and who manages the building?
• Are there any disputes, cladding or building-safety issues, and is relevant fire-safety certification (such as an EWS1 form, where applicable) available?

Your conveyancer will dig into all of this, but asking up front saves weeks, and sometimes saves you from offering at all. We see the lender side of leasehold problems weekly, so if a flat you love has an awkward lease, talk to us before assuming the mortgage will be fine.