Understanding the difference between leasehold and freehold is crucial when buying property in the UK — particularly flats, where leasehold is the norm. The terms of your lease can significantly affect your ongoing costs, property value, and rights as a homeowner.
Quick Comparison
| Feature | Freehold | Leasehold |
|---|---|---|
| What you own | Property + land permanently | Right to occupy for lease term |
| Time limit | None — you own it forever | Fixed term (e.g. 99, 125, 999 years) |
| Ground rent | None | Typically £0–£500+/year |
| Service charges | None (unless shared areas) | £1,000–£5,000+/year |
| Alterations | Your decision | Need freeholder’s permission |
| Property type | Houses (mainly) | Flats, some houses |
| Right to sell | Unrestricted | Subject to lease terms |
| Maintenance | Your responsibility | Shared via service charge |
Leasehold Explained
What a Lease Contains
| Term | What It Means |
|---|---|
| Term | Number of years remaining (e.g. 99 years from 1990 = 63 years remaining) |
| Ground rent | Annual payment to the freeholder |
| Service charge | Annual payment for building maintenance, insurance, management |
| Permissions | What you can and cannot do (pets, subletting, alterations) |
| Obligations | Your maintenance responsibilities |
| Forfeiture clause | Freeholder’s right to end the lease for breach (rare in practice) |
Ground Rent
| Type | Typical Amount | Risk |
|---|---|---|
| Peppercorn (£0) | £0 | None — the best option |
| Fixed | £50–£300/year | Low — stays the same |
| Increasing (RPI or fixed %) | Starts low, increases over time | Medium-High — can become expensive |
| Doubling | Doubles every 10–25 years | Very High — avoid completely |
The Leasehold Reform (Ground Rent) Act 2022 limits ground rent to a peppercorn (zero) for most new leases granted from 30 June 2022. Existing leases are not affected — reform is planned but not yet enacted.
Service Charges
Annual charges that cover:
- Building insurance
- Communal area cleaning and maintenance
- Grounds maintenance
- Lift maintenance
- Management company fees
- Major works (reserve/sinking fund contributions)
| Building Type | Typical Annual Service Charge |
|---|---|
| Small block (4-8 flats) | £1,000–£2,500 |
| Medium block | £1,500–£3,500 |
| Large development | £2,000–£5,000+ |
| Luxury/London | £3,000–£10,000+ |
The Critical Importance of Lease Length
| Remaining Lease | Impact |
|---|---|
| 90+ years | Good — standard, no immediate concerns |
| 80–90 years | OK — consider extending soon |
| Below 80 years | Critical — marriage value applies, extension much more expensive |
| Below 70 years | Difficult to mortgage; significant value reduction |
| Below 60 years | Very difficult to sell or mortgage |
Why 80 Years Matters
When a lease falls below 80 years, the cost of extending it increases dramatically because of “marriage value” — the increase in the property’s value created by the extension. Below 80 years, you must pay 50% of this increase to the freeholder on top of the premium.
Lease Extension Costs (Example: £300,000 Flat)
| Years Remaining | Approximate Extension Cost |
|---|---|
| 95 years | £5,000–£10,000 |
| 85 years | £10,000–£20,000 |
| 75 years | £20,000–£40,000 |
| 65 years | £30,000–£60,000 |
| 55 years | £50,000–£100,000+ |
Key point: If you are buying a leasehold property with less than 85 years remaining, factor lease extension costs into your budget.
Your Rights as a Leaseholder
| Right | Detail |
|---|---|
| Lease extension | After 2 years of ownership, you can extend by 90 years at a fair price (statutory right) |
| Right to manage | Leaseholders in a block can take over management from the freeholder |
| Right of first refusal | If the freeholder sells, leaseholders have first right to buy the freehold |
| Collective enfranchisement | Together with other leaseholders, you can buy the freehold of the building |
| Challenge service charges | Apply to a tribunal if charges are unreasonable |
Buying Leasehold: Checklist
Before buying a leasehold property, check:
- Lease length — over 85 years? If not, negotiate lease extension before purchase
- Ground rent — how much, and does it increase?
- Service charges — how much, and what do they cover?
- Management company — who are they, and are they responsive?
- Sinking fund — is there money set aside for major works?
- Planned major works — are any large bills expected?
- Building insurance — is it in place and adequate?
- Restrictions — can you have pets, sublet, or make alterations?
- Property information — TA7 leasehold form should answer most questions
Leasehold Reform (Upcoming)
The UK government has announced planned reforms including:
- Extending standard lease extensions from 90 to 990 years
- Abolishing marriage value
- Capping ground rents for existing leases
- Making it cheaper and easier to buy the freehold
These reforms are progressing through Parliament but are not yet law. Until enacted, current rules apply.
For more on the buying process, see our conveyancing guide and first-time buyer guide.