When you buy a house, you probably expect to own it outright. But when you buy a flat — and, historically, many new-build houses — you may be buying something more complicated. Understanding the difference between freehold and leasehold before you make an offer could save you a great deal of money and frustration later.
Freehold: You Own It Outright
If you buy a property as freehold, you own both the building and the land it stands on, indefinitely. There's no time limit, no landlord, and no ongoing obligations beyond your mortgage and standard maintenance. Most houses are sold freehold, and life as a freeholder is relatively simple — which is exactly why most buyers prefer it.
Leasehold: You Own the Right to Use It
If you buy leasehold, you own the property for a fixed period — the lease term — after which ownership reverts to the freeholder (landlord). You are effectively a long-term tenant, not an outright owner.
Most flats are sold leasehold, because flats share a building and someone needs to own and manage the structure as a whole. Typically: a freeholder owns the building and land; each flat owner holds a lease (originally granted for 99, 125, 250 or 999 years); and the freeholder or their managing agent maintains the common parts — roof, structure, communal areas. What you're buying is the right to live in the flat for the remaining length of the lease, with all the rights and obligations the lease sets out.
Ground Rent
Historically, most leases included a ground rent — an annual payment to the freeholder. Ground rents became controversial because some developers used escalating clauses that doubled every 10 or 25 years, making properties hard to mortgage and sell.
The Leasehold Reform (Ground Rent) Act 2022 banned ground rents on new residential leases in England and Wales — new leases granted from June 2022 can only have a peppercorn ground rent (effectively nil). Existing leases granted before that date may still carry ground rent obligations, which your solicitor will check carefully.
Service Charges
As a leaseholder you'll typically pay a service charge covering maintenance and repair of the building's structure and exterior, cleaning and lighting of communal areas, buildings insurance, managing agents' fees, and reserve ("sinking") fund contributions for major future works.
Service charges vary significantly — from a few hundred pounds a year in a small block to several thousand in a larger development with a lift or concierge — and they can rise. Major works (a new roof, exterior redecoration) can result in large, unexpected demands known as section 20 notices. Before you buy, your solicitor should obtain the last three years of service charge accounts and any notices of planned major works.
Lease Length: Why It Matters So Much
The length remaining on a lease is one of the most important factors in a leasehold purchase:
- Under 80 years remaining: significantly harder to mortgage; some lenders won't lend. Extension costs rise sharply below 80 years because of a calculation element called "marriage value".
- Under 70 years: very few mainstream lenders will offer a mortgage, and future sale becomes difficult.
- Under 60 years: serious difficulty for mainstream residential lending.
As a rule of thumb, aim for a lease with at least 85–90 years remaining at purchase. If it's shorter, factor in the cost of an extension — or make it a condition that the seller extends the lease before completion.
Extending a Lease
Leaseholders in England have a statutory right to extend their lease by 90 years (on top of what remains) and reduce the ground rent to a peppercorn, provided they've owned the property for at least two years. The cost depends on the current lease length, the ground rent, and the flat's value — the shorter the lease, the more expensive. The process involves your solicitor serving a formal notice, an independent surveyor valuing the premium, and can take several months.
The Leasehold Reform Context
The Leasehold and Freehold Reform Act 2024 made several changes — making it easier and cheaper to extend leases and buy freeholds, and improving transparency around service charges. Further reform is expected. Leasehold law is genuinely in flux, and it's one of the areas where up-to-date legal advice really matters.
Questions to Ask Before You Buy Leasehold
- How many years are left on the lease?
- Is there a ground rent, and does it escalate?
- What was the service charge last year, and the year before?
- Are there any major works planned or in progress?
- Who manages the building, and what's their reputation?
- Is there a residents' management company (giving leaseholders more control)?
- Can you extend the lease or buy the freehold?
How Bonsai Law Can Help
Leasehold purchases involve more legal complexity than freehold, and a short or problematic lease can cause real difficulties later. Our residential team reviews leases carefully, flags issues early, and advises you on the implications before you're committed. If you're considering a leasehold property, get in touch — we'd rather you knew the full picture before you exchange.
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