Freehold vs leasehold – what’s the difference?

If you own a freehold property, you own both the building and the land it sits on outright. With a leasehold, you own the property for a set period, but not the land it’s built on this remains with the freeholder, and you usually must pay them a yearly ground rent.

Key differences between freehold and leasehold

Leasehold properties are more common with flats and apartments, as they’re part of a larger building. However, more leasehold houses have been sold in recent years, especially newly built homes from developers.

When you buy a leasehold, you're buying the right to live in the property for several years (the lease). You don't own the building or land and must follow the rules set out in the lease. This may include paying ground rent and service charges and even getting permission to make changes.

Freehold properties, on the other hand, give you full ownership of the building and land. You won’t pay ground rent or service charges for communal upkeep (unless you live in an estate with shared spaces). You also don’t need permission for most changes to the property.

Following the Leasehold and Freehold Reform Act 202, there are some changes to leasehold properties. Over time, leasehold ownership will be phased out for new flats, and commonhold will become the standard. This gives each owner a share of the freehold.

Some of the changes already in place include:

  • From January 2025, leaseholders no longer need to wait two years to extend their lease.
  • It’s now easier for leaseholders in mixed-use buildings to take over the management of the property.

What is the right to manage?

If you own a leasehold flat and feel your building isn’t being maintained properly, leaseholders can come together and take over the building’s management. This is known as the right to manage. Alternatively, you can apply to a tribunal to have a new management company appointed.

What is ground rent?

Ground rent is an annual payment made to the freeholder. It may be a fixed amount or increase over time sometimes even doubling every few years. Many buyers are unaware of these increases when purchasing a leasehold, which can lead to unexpected costs.

If you're buying a leasehold, ask your solicitor or conveyancer to explain the ground rent terms. For new leases created after 30 June 2022, ground rent is capped at a “peppercorn” rate (effectively zero), but this doesn’t apply to older leases unless renegotiated.

What are service charges and maintenance fees?

These charges cover the upkeep of communal areas such as gardens, hallways, lifts, and buildings insurance mainly in blocks of flats. Charges can vary each year, and you should ask your solicitor if there are any planned works or future increases. From January 2025, you have the right to challenge poor building management.

Restrictions with leasehold properties

Leasehold properties often come with restrictions. For example, you may not be allowed pets or may need permission to make alterations, such as loft conversions. While freeholders can't unreasonably refuse, they may charge you a fee for giving consent.

Purchasing the freehold

Before purchasing a leasehold, check who owns the freehold and whether it’s likely to be sold on. If you’re buying a new build, ask the developer for a quote to buy the freehold. If you own a flat, there are specific rules around buying the freehold with other flat owners.

Lease lengths – why it matters

Most new leases are between 99–125 years, but some can go up to 999 years. The lease length affects your ability to get a mortgage. Anything under 80 years can be a red flag. Once the lease drops below 80 years, the cost of extending it goes up significantly.