Leasehold vs freehold is the most important distinction in British property that most buyers never properly learn. Two flats on the same street can look identical, cost the same, and be legally opposite: one you own outright forever, the other you own for a shrinking number of years while paying rent and charges to someone else for the privilege. Lenders care about the difference. Future buyers care about it. Your wallet, every single year, will care about it.
This guide explains leasehold vs freehold in plain English: what each means, the costs and rules that come with leasehold, the lease lengths that should stop a purchase in its tracks, and the questions to ask before you sign anything.
Freehold: You Own the Building and the Land
With a freehold property, you own the home and the land it stands on, indefinitely. You are responsible for the whole building — roof, walls, insurance, repairs — but nobody charges you ground rent, nobody’s permission is needed to keep a pet or knock through a kitchen wall (planning rules aside), and there is no clock running down on your ownership. Most houses in England and Wales are sold freehold, and it is the simpler, cleaner form of ownership.
Leasehold: You Own a Long Lease, Not the Land
With a leasehold property, you own the right to live in the home for the length of the lease — which can be anything from a few decades to 999 years — while the freeholder (or landlord) retains ownership of the building and the land. When the lease ends, ownership technically returns to the freeholder, which is why lease length is everything. Most flats are leasehold, because someone must own and maintain the shared structure: roof, hallways, lifts, gardens. The lease is the contract setting out:
- Ground rent — an annual payment to the freeholder. For leases granted since the Leasehold Reform (Ground Rent) Act 2022, ground rent on most new leases is legally zero (‘a peppercorn’); older leases can carry anything from a token sum to onerous amounts that rise over time — always check the exact figure and how it increases.
- Service charges — your share of maintaining the building: insurance, cleaning, repairs, management fees. These vary enormously and can rise; ask for the last three years’ accounts and any planned major works.
- Rules and permissions — many leases require the freeholder’s consent (often for a fee) for alterations, subletting, flooring changes or even pets.
The Lease Length Danger Zones
Think of lease length as a countdown that the whole market watches:
- 125+ years remaining: no practical problem. Most long leases start at 99, 125 or 999 years, and lenders are comfortable.
- Under 80 years: the danger zone. Extending the lease becomes significantly more expensive below 80 years because of ‘marriage value’, and many lenders grow cautious. Properties here should be priced noticeably cheaper — or the seller should extend the lease as part of the sale.
- Under 70 years: many mainstream lenders will not lend at all, shrinking your buyer pool to cash buyers and pushing the value down sharply.
If you are buying leasehold, the years remaining should be one of the first facts you establish — before falling for the kitchen.
Extending a Lease and Buying the Freehold
Leaseholders generally have legal rights on their side. Most flat owners can formally extend their lease (recent reforms raised the standard extension to 990 years and removed the old two-year ownership wait, with changes being phased in — your conveyancer will confirm what applies to you), and groups of leaseholders can often act together to buy the freehold (‘enfranchisement’) or take over management (‘right to manage’). None of this is free — the extension price reflects the value transferred — but it converts a wasting asset into a solid one, and a lease extended or freehold acquired usually pays for itself at resale.
Questions to Ask Before You Sign
- How many years are left on the lease — exactly?
- What is the ground rent, and how and when does it increase?
- What were the service charges for the last three years, and are major works planned?
- Is there a sinking/reserve fund, and how healthy is it?
- What does the lease forbid or require permission for (pets, subletting, alterations, flooring)?
- Who is the freeholder and managing agent, and what is their reputation?
- Are there any disputes, arrears or planned legal actions involving the building?
The Bottom Line
Freehold means you own the property outright; leasehold means you own a lease whose length, charges and rules will shape your costs and your eventual resale. Leasehold is not a reason to walk away from a home you love — millions of good homes are leasehold — but it is a reason to walk in with the numbers checked, the lease read, and the years counted. Buy the lease knowingly, and it will rarely surprise you.
Frequently Asked Questions
Is leasehold worse than freehold?
Not automatically — leasehold is the normal, workable way to own a flat in a shared building. It becomes a problem when the lease is short (under 80 years), ground rent escalates unfairly, or service charges are high and poorly managed. Check those three things first.
What happens when a lease runs out?
Technically the property returns to the freeholder, though in practice leaseholders have strong legal rights to extend long before that. Never let a lease drift towards expiry — extend while plenty of years remain, when it is far cheaper.
Can I extend my lease when I buy?
Often the cleanest solution is for the seller to start the extension process and assign the benefit to you at completion, so you do not have to wait to qualify. Your conveyancer can arrange this as part of the purchase.
What is a peppercorn ground rent?
A nominal, effectively zero ground rent. Since June 2022, most new residential leases in England and Wales must by law have a peppercorn (zero) ground rent. Older leases may still carry real ground rents — always check yours.
