Leasehold vs freehold

What’s the difference?

Leasehold and freehold are 2 different types of property ownership in the UK. They can affect how you buy or sell a home, your legal rights, and more.​

  • Freehold – you own the building and the land it’s built on.​
  • Leasehold – you own the property for a set length of time, but not the land it's built on.​

Understanding the difference between leasehold and freehold can help prepare you when buying your own home.

Leasehold vs freehold

 

What's the difference?

Leasehold and freehold are 2 different types of property ownership in the UK. They can affect how you buy or sell a home, your legal rights, and more.​

  • Freehold – you own the building and the land it’s built on.​
  • Leasehold – you own the property for a set length of time, but not the land it's built on.​

Understanding the difference between leasehold and freehold can help prepare you when buying your own home.

What is a freehold property?

A freehold property is where you have complete ownership of the building and the land it sits on. For example, a freehold house includes the building itself – from the roof to the walls – as well as the surrounding gardens, garage and grounds. ​

If you own a freehold, you are responsible for caring for the entire property, including all maintenance, repairs, and insurance. You're also free to make changes if you have the necessary planning permission from the local authority. ​

There is no limit to how long you can own a freehold property.

What is a leasehold property?

A leasehold property means you own the property for a set period, but not the land it's built on. Initial lease terms are usually fixed at 99, 125 or 999 years. The lease does not renew when the property is sold but continues to count down. Once the lease ends, the property returns to the owner of the land, known as the freeholder. ​

Most flats are sold as leaseholds, while some new-build houses might be leaseholds on shared-ownership agreements. ​

Leasehold agreements create a contract between the leaseholder and the freeholder that outlines everyone's responsibilities. ​

For the leaseholder, these might involve:​

  • paying certain yearly costs such as ground rent​
  • monthly service charges that go towards repairs, maintenance, and/or upkeep.​

The freeholder is then responsible for:​

  • the roof and exterior of the property​
  • common areas in a block of flats, such as the entrance hall and staircase.​

Some leaseholders may exercise their 'right to manage'. This allows them to take control of the maintenance of the building.

What's the difference between freehold and leasehold?

Take a look at the differences between a leasehold vs a freehold to see which one works best for you.

Leasehold property

Benefits

  • Cheaper – Leasehold properties can be cheaper up front compared to freehold.​
  • Fewer responsibilities – Maintenance, repairs and other responsibilities for the building usually lie with the freeholder.​
  • No building's insurance – The freeholder often arranges and pays for the building's insurance, so this is usually already covered. Check your lease to make sure.​
  • Extra amenities – Some leasehold properties offer access to shared amenities, such as gardens, fitness centres and lounge areas. They may also have enhanced security, such as a concierge or CCTV.

Things to consider

  • Restrictions – The freeholder may have restrictions such as no pets, home improvements, or running a business from your home.
  • Selling and remortgaging – Selling or remortgaging a leasehold property with a short lease can be difficult, especially if the lease has less than 80 years left.
  • Rent and service charges – On top of your mortgage, you may have to pay ground rent and extra service charges for maintenance and upkeep.
  • Limited ownership – With a leasehold, you only own the lease, rather than exclusive ownership of the land and property it sits on.
  • Long-term costs – While the upfront cost of the property can be cheaper, long term can work out more expensive when you add in other charges.

Freehold property

Benefits

  • No lease – Saves you the hassle of keeping track of a lease and the extra cost of extending it.
  • Flexibility – You're free to carry out home improvements, with permission from the local authority. You can also keep pets in the property.
  • No charges – You don't have to worry about extra charges such as admin fees, service charges, or ground rent.
  • Full ownership – You have complete ownership of the property and the land on it as long as you meet your mortgage payments.

Things to consider

  • Maintenance costs – You'll be responsible for maintenance and upkeep of the property and paying for building's insurance.​
  • Limited building types – Most freehold properties are houses, so if you want to buy a flat, you may find it harder to find one.​
  • Purchase price – The asking price for a freehold property can be higher up front than a leasehold.

Buying a leasehold property

Here are some key points to think about.

Length of the lease

The length of the lease can affect the value of a property. As the lease term goes down over time, this can make a property less desirable. You could struggle to get a mortgage if there’s less than 70 years left on the lease.

Extending the lease

Leasehold property owners can ask to extend the lease at any time. Qualifying tenants who own their home for 2 years can extend their lease by 90 years for a flat, or 50 years for a house.​

Qualification is usually based on having an original lease for more than 21 years. The cost of extending your lease will depend on the type of property. If you can't come to an agreement with the freeholder, you can appeal.

Charges on leasehold properties

Freeholders are usually responsible for the maintenance and repair of the building – normally through a monthly service charge. They may also need to pay into a fund to cover unexpected repairs or maintenance.​

This is unless leaseholders exercise their ‘right to manage’ or pass responsibility to a third party.

Getting a mortgage or reselling the property

Lenders might consider a lease with less than 70 years to be risky. This could make it difficult to get a mortgage as a buyer or sell as an owner. A lease with 100+ years usually means more market value.

How to check if a property is freehold or leasehold

Property listings and websites should say if a property is freehold or leasehold. ​

If this isn't the case, you can:​

  • ask your solicitor or estate agent to find out for you​
  • search for the property in the Land Registry or Land and Property Index​
  • ask for a copy of the deeds to the property, which will tell you what type of ownership the house is under.​

You should also be able to find out how long is left on a leasehold property using these options.

Find out what your mortgage could look like

You could lose your home if you don’t keep up your mortgage repayments

Let’s look at the details

  • Having a share of a freehold means you only own part of the freehold, instead of owning the whole property outright. This usually applies when buying a freehold flat rather than a house.​

    ​A share of a freehold can give you more control over your flat than a leasehold, as you’ll be directly involved in making decisions about the property and land. If a freehold is split among lots of shareholders, any decisions must be made as a group before they happen.​

    Not all lenders have the same criteria for freehold mortgages, so be sure to check before buying a freehold property.

  • A flying freehold is where all or part of a property is over another property or piece of land. For example, if your neighbour’s balcony hangs over your property, it’s considered a flying freehold. Other situations where a flying freehold may happen include:​

    • a cellar or basement vault that runs beneath another property
    • archways​
    • rooms built across passageways​
    • semi-detached or adjacent terraced properties that do not have a defined vertical lining dividing them.​

    When applying for a mortgage, it’s wise to check whether a property has a flying freehold. If it does, it could come with extra risks and complications. Lenders may also not be able to offer you a mortgage on a flying freehold.

  • Yes, you might be able to buy the freehold of your leasehold flat. But you’ll need to ask your landlord. You can do this at anytime during your lease.

    To buy the freehold of a leasehold flat, you’ll need to ask to buy a share of the freehold. You can do this through an informal negotiation or by taking a form legal action – known as a collective enfranchisement. ​

    If your landlord wants to sell the building anyway, they will usually offer you and other leaseholders the chance to buy it first. This is your right of first refusal. ​

    Buying the rights to your freehold flat – or even just a share – can be difficult. You might have to pay more if you already have a long lease. But you may end up saving on lease extensions, and there is a chance that you could add extra value to the property.

  • Leasehold and freehold properties suit different needs and circumstances. Freehold ownership is usually simpler and more flexible, but properties might be more expensive to buy.​

    Leaseholds are often cheaper and involve less maintenance, but they have some restrictions – both in terms of control and property type. It all comes down to what you can afford and the type of home you want to buy.​

    Before choosing to buy a freehold or leasehold property, you might want to factor in:​

    • your budget​
    • the location (city centre, outskirts, countryside)​
    • the type of property (flat, house)​
    • your mortgage eligibility.

  • When a leasehold ends, ownership returns to the freeholder. The leaseholder must leave the property, unless they arrange to extend the lease. Leaseholders can also choose to buy the freehold through a process called enfranchisement.

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