Leasehold vs freehold in the UK does not get nearly enough attention. Most first time buyers are vaguely aware that flats tend to be leasehold and houses tend to be freehold. But the full implications rarely land until you are deep into a purchase. Suddenly your solicitor is mentioning ground rent, service charges, and a lease with 74 years left on it.
What Is the Difference Between Leasehold and Freehold?
Freehold is the simpler of the two. When you buy a freehold property, you own the building and the land it sits on outright. There is no time limit and no ongoing payment to a landlord. What you buy is yours in the fullest sense.
Leasehold is different. You are purchasing the right to occupy the property for a fixed period of time. That period is the lease term. When it expires, ownership reverts to the freeholder unless you have extended the lease. You do not own the land or the building itself. You have a long term tenancy, and you are bound by the terms of that lease throughout.
The UK has one of the most unusual property systems in the world because of this. Around five million properties in England and Wales are leasehold. The vast majority are flats. Leasehold houses were also common until recently, though new leasehold house sales have now been banned.
Why Does It Matter in Practice?
Because leasehold comes with ongoing costs and obligations that freehold does not. Those costs can be significant.
Ground rent. Leaseholders have historically paid an annual ground rent to the freeholder for the use of the land. Some were modest fixed sums. Others were structured to double every ten or twenty years, creating serious financial problems and making properties hard to mortgage and sell. Ground rents on new leases granted after 30 June 2022 are now banned and set to a peppercorn, meaning effectively zero. However, millions of older leases still carry ground rent obligations that remain in force.
Service charges. In a leasehold flat, the freeholder or a managing agent maintains the building, communal areas, and grounds. Leaseholders pay for this through service charges. These can run to hundreds or even thousands of pounds per year. They have historically been difficult to challenge. Reforms are underway to improve transparency, but the system still has significant shortcomings for many leaseholders.
Lease length. This is where leasehold gets genuinely complicated. When a lease drops below 80 years remaining, it becomes significantly more expensive to extend. Below 80 years, a concept called marriage value has historically meant the freeholder is entitled to a share of the increased value created by the extension. The Leasehold and Freehold Reform Act 2024 abolishes marriage value. However, this provision is not yet fully in force.
As a general rule, be cautious about buying any leasehold property with fewer than 85 years remaining. Mortgage lenders often have their own minimum requirements, typically between 70 and 85 years. A short lease property will also be harder to sell and worth less than an identical property with a long one.
What Has Changed in the Law?
The leasehold system is undergoing its most significant reform in decades. Here is where things currently stand.
The Leasehold and Freehold Reform Act 2024 received Royal Assent in May 2024. One key change is already in force. From January 2025, leaseholders no longer need to have owned their property for two years before extending the lease or buying the freehold. You can do so from the day you complete.
When fully implemented, the Act will also increase the standard lease extension term to 990 years for both flats and houses. It will make it cheaper and easier to buy the freehold. It will raise the threshold at which leaseholders can exercise the Right to Manage, increasing it from buildings with up to 25% commercial space to buildings with up to 50%.
The government published a draft Commonhold and Leasehold Reform Bill in January 2026. This proposes to cap ground rents on existing leases at £250 per year, ban new leasehold flats entirely, end the practice of forfeiture, and make commonhold the default tenure for new flat developments. This bill is still going through Parliament and is not yet law. Full implementation is unlikely before 2027 at the earliest.
What Is Commonhold?
Commonhold is a third form of property ownership. It has existed in law since 2002 but has barely been used in practice.
Under commonhold, each flat owner holds their unit as a freehold. All flat owners jointly own the building and common areas through a commonhold association. There is no freeholder above them. There is no lease ticking down and no ground rent. It is broadly how flat ownership works across much of Europe.
The government intends to make commonhold the default for new flat developments. For buyers looking at new builds in the coming years, this is a meaningful change. For the five million existing leasehold properties, any transition will take considerably longer.
What Should You Do If You Are Buying Leasehold?
A few essential steps before you commit.
Check the lease length straight away. If it is below 85 years, get specialist advice on the cost of extending it. Factor that cost into your offer. If the lease is below 80 years, be especially cautious. The extension process becomes more complex and considerably more expensive.
Ask for a full breakdown of current service charges. Request the last three years of accounts if possible. Look for any upcoming major works that leaseholders will be asked to contribute to. Roof repairs, cladding replacement, and lift upgrades can all result in large unexpected bills.
Ask about ground rent. If the property was bought before June 2022, ground rent may still apply. Check the amount and look for any escalation clauses in the lease.
Use a solicitor who specialises in leasehold conveyancing. Lease terms vary significantly. The financial implications of those terms over decades of ownership can be substantial, so this is not the place to cut corners.
Is Leasehold Always Worth Avoiding?
Not necessarily. In many parts of the country, buying a leasehold flat is the only realistic way onto the housing ladder. The key is going in with your eyes open.
A well priced leasehold property with a long lease, reasonable service charges, and a competent managing agent can be a sound purchase. Freehold is simpler and generally preferable where you have the choice. But choice is not always available.
The reforms underway are meaningful. The direction of travel is clearly toward a fairer system for leaseholders. Getting there will take time. Until it does, doing your homework before you buy is the most important thing you can do.nt advice. While we strive to provide accurate and up-to-date information, Iceburg Wealth is not responsible for any errors or omissions, or for outcomes resulting from the use of this information. Readers should seek professional advice before making any financial decisions.