Leasehold vs Freehold — What Every Buyer Needs to Know Before Purchasing

The difference between freehold and leasehold ownership is one of the most important concepts in UK property law — and one of the most misunderstood by buyers.

The Fundamental Difference

**Freehold** means you own the property and the land it stands on outright, indefinitely. There is no expiry on your ownership. You are responsible for the building entirely.

**Leasehold** means you own the right to occupy the property for a fixed term (the lease). When the lease expires, ownership reverts to the freeholder (landlord) unless you extend it or buy the freehold. Leaseholders pay ground rent to the freeholder and service charges for the maintenance of the building.

Why Leasehold Still Exists for Flats

When multiple properties occupy a single building, freehold is impractical — who owns the roof? Who maintains the stairwells? Leasehold provides a structure for this. Most flats in England and Wales are leasehold. This is not inherently problematic, but the terms matter enormously.

New Build Houses and the Leasehold Reform Act 2024

Following years of scandal around developers selling new-build houses as leasehold with doubling ground rent clauses, the Leasehold and Freehold Reform Act 2024 now requires new-build houses to be sold as freehold. If a developer attempts to sell you a new-build house as leasehold in 2026, take urgent legal advice.

What to Check on a Leasehold Property

**Lease length:** most mortgage lenders require a minimum of 70–85 years on the lease at the point of purchase. Under 80 years, extension costs rise significantly (the "marriage value" calculation applies below 80 years). Under 70 years, many lenders will not lend.

**Ground rent:** since the Leasehold Reform (Ground Rent) Act 2022, new leases must charge only a peppercorn (notional) ground rent. For existing leases with escalating ground rent clauses (particularly "doubling every 10–25 years"), check the current ground rent and projected future payments carefully.

**Service charge:** review the last three years' service charge accounts and the most recent budget. High or unpredictable service charges are a major risk. Look for recent or upcoming major works (external redecoration, lift replacement, roof works) which are charged as a major works contribution.

**Management company:** who manages the building? Is it the freeholder, a residents' management company, or a professional managing agent? Review performance, responsiveness, and any disputes on record.

Lease Extension Costs

Flat owners with a lease under 90 years should consider extending the lease. After two years of ownership, you have the statutory right to extend by 90 years at a peppercorn ground rent. The premium payable to the freeholder depends on lease length, ground rent, and property value — and can range from a few thousand pounds to over £100,000 for short leases on valuable properties.

Good Leasehold vs Bad Leasehold

A flat on a 999-year lease, with a peppercorn ground rent, managed by a residents' management company, in a well-maintained building, with low and stable service charges — this is good leasehold. It is perfectly fine to buy.

A flat on a 75-year lease, with a ground rent doubling every 10 years, managed by a distant freeholder with no accountability, with a major works liability of £30,000 approaching — this is problematic leasehold. The risks are real.

Your conveyancer should report specifically on all of these matters. Do not proceed to exchange without a clear understanding of the lease terms. Property Passport UK stores your lease documents, service charge history, and building management records — all essential information for future buyers and lenders.