Associate Pam Kamel, in our Residential Property team, explains the differences between leasehold and freehold ownership.
If you’re considering buying a property in England, you have likely encountered the terms ‘leasehold’ and ‘freehold’. They define how a property is owned and can have a significant impact on your rights, responsibilities, and any costs you may be liable for, now and in the future.
Understanding these differences, and your legal rights and responsibilities as a property owner, is essential if you are buying or selling a property. If you are unsure about where you stand at any stage, seek advice from a solicitor, conveyancer or property professional.
What is freehold ownership?
Freehold is considered the most complete form of property ownership in England. If you own a property on a freehold basis, you own both the building and the land it stands on, indefinitely. There is no time limit on your ownership, and you are generally free to do as you wish with your property, subject to planning permissions and local regulations. Most houses in England are sold as freehold.
- Ownership: You own the property and the land outright.
- Duration: Ownership is perpetual – there is no expiry date.
- Responsibilities: You are responsible for maintaining the building and land, and for arranging your own buildings insurance.
- Costs: Aside from your mortgage and council tax, there are usually no ground rent or service charges payable to a third party.
What is leasehold ownership?
In contrast, when you buy a leasehold property, you own an internal part of the building (a flat/maisonette) for a fixed term, but not the land it sits on. The land (and often the building’s exterior structure) remains owned by the freeholder.
The lease spells out your rights and obligations and will eventually expire, at which point ownership reverts to the freeholder unless the lease is extended or the property is enfranchised (enfranchisement will typically apply to maisonettes rather than flats).
When buying a leasehold property, it is important to check how many years are left on the lease as mortgages can be difficult to obtain for leases under 80 years, and a property with a short lease may be harder to sell in the future. You may also have the right to extend the lease or to buy the freehold, depending on circumstances, but this can involve legal processes and often significant expense. It is also worth noting that when extending a lease, the premium to be paid for a voluntary lease extension will increase as the number of years remaining on a lease decrease.
- Ownership: You own the property for the duration of the lease, but not the land it stands on.
- Duration: Leases can range from as little as 99 years to 999 years. Once the lease expires, ownership reverts to the freeholder.
- Responsibilities: You may be required to pay ongoing ground rent, service charges and maintenance fees to the freeholder or management company/agent. The freeholder (often via a management company/agent) is usually responsible for maintaining the building’s structure and common areas meaning that you will not normally require buildings insurance. This may be different if you own a maisonette, and you are likely to arrange buildings insurance if so.
- Costs: Ongoing payments for ground rent and service charges are common. If required, extending the lease or buying the freehold can incur significant costs. Conveyancing costs will also typically be higher for a leasehold property due to the increased complexity.
Key differences at a glance
|
Feature |
Freehold |
Leasehold |
|
Ownership of the property |
Full, permanent |
Limited, for the lease term |
|
Ownership of the land |
Yes |
No |
|
Duration |
Perpetuity |
Until the lease expires |
|
Ongoing Charges |
None (unless this is part of a newer development where charges are paid for maintenance of communal areas) |
Ground rent and service charges |
|
Responsibility |
The property owner is responsible for maintaining the building’s structure and land and for arranging buildings insurance |
The freeholder (often via a management company/agent) is usually responsible for maintaining the building’s structure and common areas meaning that the leaseholder does not normally require buildings insurance |
Recent reforms
In recent years, there have been calls to reform leasehold law in England, particularly to address unfair ground rents and improve rights for leaseholders. The government’s draft Commonhold and Leasehold Reform Bill proposes to cap ground rent at £250 a year, before reducing it to a peppercorn (nominal or zero) rent after 40 years. Any changes will likely come into force in 2028.
The government is also introducing changes to make lease extensions cheaper and more straightforward, as well as moving to ban new leasehold houses in most cases.
Our Residential Property team can help and advise on all aspects of residential property.
For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800.
This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.
