leasehold vs. freehold
published: march 28, 2025
understanding the difference between leasehold and freehold properties is crucial when buying a home in the UK. These two forms of property ownership have significant implications for your rights, responsibilities, and the long-term value of your investment.
freehold
when you own a freehold property, you own both the building and the land it stands on outright, in perpetuity (forever).
key characteristics:
- you own the property and land outright
- no ground rent or service charges to pay
- responsible for all maintenance and repairs
- don't need permission for alterations (subject to planning regulations)
- no lease to renew
typically applies to: houses (though not always)
leasehold
with a leasehold property, you own the property for a fixed period (the length of the lease) but not the land it stands on. the land belongs to the freeholder (landlord).
key characteristics:
- ownership is temporary (typically 99-999 years)
- pay ground rent to the freeholder
- pay service charges for maintenance of common areas
- may need permission for significant alterations
- lease needs extending as it runs down
typically applies to: flats/apartments, some new-build houses
important considerations for leasehold properties
lease length
the length of the remaining lease is crucial:
- leases under 80 years can be expensive to extend
- properties with short leases (under 70 years) can be difficult to mortgage
- the value of the property decreases as the lease shortens
costs
leasehold properties come with additional ongoing costs:
- ground rent: paid to the freeholder
- service charges: for maintenance of common areas and building insurance
- administration fees: for permissions or information
- reserve/sinking fund: for major works
restrictions
leasehold properties often come with restrictions:
- may need permission for alterations
- restrictions on pets
- limitations on subletting
- rules about noise and behavior
lease extension
if you own a leasehold property, you may need to extend the lease at some point:
- statutory right to extend after owning for 2 years
- cost increases significantly when lease drops below 80 years
- process can be complex and expensive
commonhold
commonhold is a less common alternative to leasehold for flats:
- owners have a freehold interest in their individual unit
- common areas owned and managed by a commonhold association
- no lease that runs down over time
- relatively rare in the UK but may become more common with recent reforms
how propi helps with leasehold and freehold properties
at propi, we thoroughly explain the implications of leasehold or freehold status for your specific property. for leasehold properties, we carefully review the lease terms, highlight any onerous clauses, verify service charges and ground rent details, and advise on potential lease extension costs. our goal is to ensure you fully understand what you're buying and any future implications.