Leasehold vs Freehold: What You Need to Know
The key differences between leasehold and freehold, what to check before buying, and your rights as a leaseholder.
The basics
Freehold means you own the property and the land it sits on outright, forever. Leasehold means you own the property for a fixed period (the lease term) but not the land — you are essentially renting the land from the freeholder. Most houses are freehold; most flats are leasehold because the building is shared.
Lease length matters
A lease with 80+ years remaining is generally fine for mortgage purposes. Below 80 years, extending becomes significantly more expensive because "marriage value" kicks in — the freeholder is entitled to 50% of the increase in property value that the extension creates. Below 70 years, many lenders will not offer a mortgage at all.
Service charges and ground rent
Leaseholders pay service charges for building maintenance (insurance, cleaning, repairs) and ground rent to the freeholder. The Leasehold Reform (Ground Rent) Act 2022 caps ground rent at zero (a "peppercorn") for new leases granted after 30 June 2022, but existing leases may still have escalating ground rent clauses.
Your rights as a leaseholder
You have the right to extend your lease by 90 years (for flats) after owning for 2 years. You can collectively purchase the freehold with other leaseholders (collective enfranchisement) if at least 50% of flats participate. You can challenge unreasonable service charges at a tribunal, and your freeholder must consult you on major works over £250 per leaseholder.
What to check before buying
Ask your solicitor to review: remaining lease length, ground rent terms (especially escalation clauses), service charge history (3 years minimum), any planned major works, and the freeholder/managing agent reputation. Check if there are any outstanding section 20 notices for major works — you could inherit a large bill.
Upcoming reforms
The Leasehold and Freehold Reform Act 2024 aims to make lease extensions cheaper and simpler, extend enfranchisement rights, and ban new leasehold houses. Implementation is phased — check current status as not all provisions are yet in force.