Freehold vs leasehold: What's the difference and why it matters
When you buy a property in England and Wales, you will come across the words freehold and leasehold at the very start of every listing. Understanding what they mean, and the practical differences between them, is one of the most useful things any buyer can do before starting their search.
What freehold means
With a freehold property, you own the building and the land it stands on outright. There is no time limit on your ownership and no landlord above you. You are responsible for maintaining the property, including its structure and exterior, and you can make changes to it subject to planning permission and building regulations. You do not pay ground rent or service charges, though some freehold properties on newer managed estates do carry annual estate management charges for the upkeep of shared spaces such as roads and green areas. The majority of houses in England and Wales are sold freehold.
What leasehold means
With a leasehold property, you own the right to occupy the property for a fixed number of years as set out in the lease. You do not own the land, and you do not own the building structure. At the end of the lease term, ownership returns to the freeholder. Leases are typically granted for long periods, commonly 99, 125, or 999 years, and when you buy a leasehold property you take over however many years remain on the existing lease.
Most flats in England and Wales are sold leasehold. Some houses have also been sold leasehold, though this practice has been significantly restricted by the Leasehold and Freehold Reform Act 2024.
The ongoing costs of leasehold
Leasehold ownership typically involves costs beyond the mortgage. Ground rent is a charge paid to the freeholder, though most new residential leases granted since June 2022 set ground rent at a nominal rate of zero. Existing leases may carry higher ground rents, so it is important to check the terms of any specific lease rather than assume.
Service charges cover the maintenance of communal areas, the building structure, and buildings insurance. The amount can vary considerably from one development to another and from year to year, depending on what work is carried out. Major works, such as roof repairs or lift replacement, may attract additional one-off contributions on top of the regular service charge.
You will also need the freeholder's permission for significant alterations to your property. The extent of these restrictions varies from lease to lease and is set out in the lease document itself.
Why lease length matters
The remaining years on a lease is one of the most important things to check before buying a leasehold property. Most mortgage lenders have minimum requirements for lease length, and properties with fewer than approximately 70 to 80 years remaining can be harder to sell or remortgage. The cost of extending a lease tends to increase as the remaining term falls, so a longer lease at the point of purchase is generally preferable.
Since early 2025, leaseholders in England no longer need to have owned a property for two years before applying to extend their lease. This means a buyer can start the extension process shortly after purchase.
Share of freehold and commonhold
Some flats are sold with a share of freehold, where the flat owners collectively own the freehold of the building. This gives owners greater control over how the building is managed and maintained. Commonhold is a less common alternative, where each flat is owned outright within a collectively managed structure. The government has indicated that commonhold is intended to become the default tenure for new flats over time.
What to ask before you buy
For leasehold properties, your solicitor will review the lease in full as part of the conveyancing process. It is worth asking your agent early about the remaining lease length, current service charges, recent and planned major works, and any restrictions in the lease that might affect how you want to use the property.
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