Buying a property in the UK? Understanding leasehold and freehold is essential. This guide explains the difference, the risks of leasehold, and how recent reforms have strengthened leaseholders' rights.
Whether you are buying a house or flat in the UK, you will encounter the terms freehold and leasehold. Understanding the difference is essential — the type of ownership significantly affects your rights, costs, and ability to sell.
If you own a property freehold, you own both the building and the land it stands on, outright and indefinitely. There is no end date on your ownership and generally no ongoing payments to a third party for the right to occupy.
Freehold is the preferred form of ownership for houses. You are responsible for maintaining the property but have full control.
If you own a property leasehold, you own the building (or your part of it) for a fixed period of time — the lease term — after which ownership reverts to the freeholder (the landlord). Leasehold is common for flats and some houses (though the latter is increasingly rare following recent reforms).
Key features of leasehold:
Lease length diminishes over time. A lease that started at 99 years may have only 72 years remaining when you buy it. This matters enormously:
Always check the remaining lease term before buying a leasehold property.
Leaseholders of flats have the right to extend their lease by 90 years (on top of the current unexpired term) under the Leasehold Reform, Housing and Urban Development Act 1993, provided they have owned the property for at least 2 years.
The Leasehold and Freehold Reform Act 2024 (in force from 2024) has improved this significantly:
If you own a flat, you and your fellow leaseholders may be able to collectively purchase the freehold of the building. This gives you direct control over management, maintenance, and service charges.
The right to collective enfranchisement requires:
The Leasehold and Freehold Reform Act 2024 made collective enfranchisement easier and cheaper.
If you own a leasehold flat, you will pay service charges — contributions towards the cost of maintaining and managing the building. These can include:
Service charges must be reasonable — you can challenge unreasonable charges at the First-tier Tribunal (Property Chamber). The tribunal can determine what costs are reasonable, and leaseholders have won significant reductions in many cases.
Until the Leasehold Reform (Ground Rent) Act 2022, landlords could charge escalating ground rents — sometimes doubling every 10 years — making properties practically unsaleable.
Since June 2022, new residential leases must be granted at a peppercorn ground rent (effectively zero). This does not automatically apply to existing leases — if you have a pre-2022 lease with escalating ground rent, you may need to negotiate a variation.
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