Leasehold vs Freehold: What Every Buyer Needs to Know

Last updated: May 2026 · 7 min read

Understanding the difference between leasehold and freehold is crucial when buying property in England and Wales. Get it wrong and you could face escalating costs, difficulty selling, or even lose your home when the lease expires. This guide explains everything you need to know.

What Is Freehold?

Freehold means you own the property and the land it sits on outright, with no time limit. You are responsible for all maintenance and there is no ground rent or service charge to pay (unless the property is on a managed estate with shared facilities). Most houses in England and Wales are freehold. This is the simplest and most secure form of ownership.

What Is Leasehold?

Leasehold means you own the property for a fixed period of time (the lease term), but the freeholder owns the land and building. When the lease expires, ownership reverts to the freeholder unless you extend it. Most flats are leasehold because multiple owners share the building structure. Some newer houses have been sold as leasehold too, though this practice is being phased out.

Why Lease Length Matters

Mortgage lenders typically require at least 70-80 years remaining on the lease. Below 80 years, extending the lease becomes significantly more expensive because you must pay "marriage value" to the freeholder. Below 60 years, many lenders will not offer a mortgage at all, making the property very difficult to sell. Always check the remaining lease length before making an offer. A property with a short lease might look cheap, but the extension cost can be tens of thousands of pounds.

Ground Rent and Service Charges

Ground rent is the annual fee you pay to the freeholder for the land. Under the Leasehold Reform (Ground Rent) Act 2022, ground rent on new leases is capped at a peppercorn (effectively zero). However, older leases may have escalating ground rent clauses — some double every 10-25 years, which can make the property unmortgageable. Service charges cover maintenance of communal areas, buildings insurance, management fees and sinking fund contributions. These can range from 1,000 to 5,000+ pounds per year depending on the building.

Your Rights as a Leaseholder

You have the right to extend your lease by 90 years (plus the remaining term) after owning for 2 years. You have the right to challenge unreasonable service charges at a First-tier Tribunal. With other leaseholders, you may have the right to collectively purchase the freehold (enfranchisement). The Leasehold and Freehold Reform Act 2024 is extending these rights further, including removing the 2-year ownership requirement for lease extensions.

Buying Tips for Leasehold Properties

Check remaining lease length (80+ years minimum). Read the last 3 years of service charge accounts. Ask if any major works are planned. Check the ground rent clause for escalation. Find out who manages the building and check their reviews. Ask if the freeholder has a history of disputes. Factor all these costs into your budget alongside the purchase price and stamp duty.