Freehold vs Leasehold: What’s the Difference and Why It Matters?

When you’re buying a property, you’ll quickly come across the terms freehold and leasehold. Understanding the difference is important because the type of ownership can affect your responsibilities, ongoing costs and the questions you need to ask before committing to a purchase.

What is the difference between freehold and leasehold?

With a freehold property, you own the property and the land it stands on outright. There is no fixed term to your ownership, and you are generally responsible for maintaining the property, including its structure and exterior, as well as the land and grounds within your ownership. Any alterations will still need to comply with planning permission, building regulations and any other relevant requirements.

You won’t normally pay ground rent or service charges on a freehold property, although some newer developments have estate management charges towards the upkeep of shared roads, landscaping or other communal areas.

With a leasehold property, you own the right to occupy the property for the number of years remaining on the lease. The freeholder owns the building and, in a typical flat, the common parts of the development. Most flats are leasehold, although houses can also be leasehold.

Lease terms are commonly 99, 125 or 999 years, although they can vary. When you buy a leasehold property, you take on the remaining term of the existing lease, it doesn’t restart when the property changes hands.

What costs come with a leasehold property?

Leasehold ownership can involve costs that you wouldn’t normally have with a straightforward freehold property.

Ground rent may be payable under the lease. However, most new qualifying residential leases granted since 30 June 2022 cannot charge more than a nominal “peppercorn” ground rent. Existing leases can still contain ground rent, so it’s important to check the specific terms of the property you’re buying.

Service charges contribute towards the costs of maintaining and managing the building or communal areas. These can cover things such as cleaning, gardening, repairs and building insurance, depending on the lease. Charges vary between developments and can change over time.

You may also need to contribute towards major works, such as roof repairs, window replacement or lift works. These can result in additional costs beyond the regular service charge, so it’s important to find out whether any major works are planned or underway.

Your lease may also contain restrictions covering things such as alterations, keeping pets or subletting. The exact requirements will depend on the individual lease.

Why does the length of the lease matter?

The remaining lease term is one of the most important things to check when buying a leasehold property.

As the term gets shorter, it can become more difficult to obtain a mortgage or sell the property. Government guidance notes that lenders are less likely to lend where there are fewer than 80 years remaining, while extending a lease can also become more costly as the term reduces.

There have also been recent changes to leasehold law. Since January 2025, leaseholders no longer need to have owned their property for two years before starting a qualifying claim to extend their lease or buy their freehold. Further reforms are being introduced under the Leasehold and Freehold Reform Act 2024, although some of the changes are not yet in force.

The government is also proposing to make commonhold the default tenure for new flats, replacing leasehold in most new developments. These proposals are still going through the legislative process, so they should not be treated as current requirements.

What should you check before buying?

If you’re considering a leasehold property, don’t be put off by the word “leasehold” alone. The terms of the individual lease are what matter.

Before committing to a purchase, it’s worth finding out:

• How many years are left on the lease?
• What is the current service charge and what does it cover?
• Are there any planned or recent major works?
• Is there a ground rent, and how much is it?
• Are there restrictions on alterations, pets or subletting?
• Who manages the building or development?

Your solicitor or conveyancer will review the lease and relevant information as part of the conveyancing process, but asking these questions early can help you understand the property before you make a decision. Government guidance also recommends checking service charges, major works, lease length and restrictions before committing to a leasehold purchase.

Thinking about buying your next home? Talk to your local team about the information you should look out for before making an offer. Discussing your mortgage options can be wise and it is worth having a chat with us so we can put you in touch with the fantastic advisors we recommend at APR Money Ltd.