Leasehold vs Freehold: The Differences Explained
Freehold means you own the building and the land outright. Leasehold means you own the right to occupy for a fixed term under a lease, pay ground rent and service charges to a landlord, and need to watch the lease length.
Key points
- A freeholder owns the property and land outright; a leaseholder owns a lease for a fixed term and must comply with its terms and pay charges to the landlord.
- New leases granted since 30 June 2022 can only charge a peppercorn ground rent, but existing ground rents still apply until Parliament caps them.
- Landlords must consult leaseholders before works costing any one of them more than £250, or long-term contracts costing more than £100 a year.
- A lease with 80 years or fewer left costs more to extend because marriage value still applies; many lenders want 70 to 85 years remaining.
- Since 31 January 2025 you no longer need to own a flat for two years before extending the lease or buying the freehold.
- The ban on new leasehold houses, 990-year extensions and the draft commonhold Bill are not yet law as at October 2026.
Freehold means you own the property and the land it stands on outright, for ever, with nobody above you in the chain of ownership. Leasehold means you own the right to occupy a property for a fixed number of years under a lease granted by a landlord (the freeholder), and you must pay ground rent and service charges, follow the lease's rules and watch the term run down. Most houses in England and Wales are freehold; most flats are leasehold. This guide explains the practical differences, what leasehold costs, why the years left matter, where leasehold houses, share of freehold and commonhold fit in, which reforms are in force in October 2026, and what to ask before buying a flat.
What freehold means
A freeholder owns the land and everything built on it indefinitely. There is no landlord, no ground rent and no lease to run out. You are responsible for the whole building, roof to foundations, and you can alter or extend it subject only to planning permission, building regulations and any covenants registered against the title.
Freehold is not always free of recurring charges. Houses on many newer estates pay an estate rentcharge or management charge for unadopted roads and green spaces, with fewer legal protections than leasehold service charges; Part 5 of the Leasehold and Freehold Reform Act 2024 would change that, but it is not yet in force. What conveyancing involves explains the searches and enquiries that reveal such charges before you exchange.
What leasehold means
A lease is a long tenancy. The freeholder (or an intermediate head landlord) grants you the exclusive right to the property for a fixed term, typically 99, 125 or 999 years, in return for a premium (the price) and, on older leases, a ground rent. When the term ends the property reverts to the landlord, so a lease is a wasting asset: a flat with 60 years left is worth less than one with 150.
The lease is also a long contract. It sets out what you own (usually the inside of the flat, not the structure), what the landlord must do (insure and maintain the building, recovering the cost through the service charge), and what you may not do without consent, such as sublet, keep pets or alter the structure. Serious breaches can lead to forfeiture, where the landlord asks the court to end the lease, although unpaid charges of £350 or less cannot found a forfeiture unless outstanding for more than three years, and the breach must first be admitted or determined by a tribunal or court.
Statutory rights sit on top of the lease: the right to extend it or, with neighbours, to buy the freehold under the Leasehold Reform, Housing and Urban Development Act 1993; the right to take over management through a right to manage company under the Commonhold and Leasehold Reform Act 2002; the right of first refusal if the landlord sells the freehold, under the Landlord and Tenant Act 1987; and the right to challenge unreasonable charges at the First-tier Tribunal (Property Chamber).
Ground rent, service charges and other leasehold costs
Ground rent
Ground rent is a payment to the landlord for nothing in return. On older leases it may be a token sum, a fixed £100 to £400 a year, or a figure that doubles every 10 or 25 years. The Leasehold Reform (Ground Rent) Act 2022 stopped the problem for the future: a new long residential lease granted for a premium on or after 30 June 2022 (1 April 2023 for retirement developments) can charge only a peppercorn, meaning zero, and a landlord who demands more faces a penalty of £500 to £30,000 and must refund the money within 28 days. The 2022 Act does not touch existing leases. The draft Commonhold and Leasehold Reform Bill, published on 27 January 2026, proposes to cap existing ground rents at £250 a year and phase them down to a peppercorn over 40 years, but it is a proposal only: the Bill had not been introduced to Parliament as at 30 October 2026, and the government has said the cap could take effect in late 2028.
Service charges and the section 20 rules
The service charge is your share of the cost of running the building: insurance, cleaning, lifts, repairs, management fees and often a reserve fund. Charges must be reasonable, and you can ask the First-tier Tribunal to decide whether they are under section 27A of the Landlord and Tenant Act 1985. A demand must come with a summary of your rights, and costs left undemanded for more than 18 months are generally lost to the landlord.
Before carrying out works that will cost any one leaseholder more than £250, or entering a contract of more than 12 months that will cost any leaseholder more than £100 a year, the landlord must consult under section 20 of the 1985 Act, in stages with 30-day windows for comments and nominations of contractors. A landlord who skips consultation without the tribunal's dispensation can recover only £250 (or £100 a year) from each flat, however much the works cost. These thresholds have not changed since 2003. The transparency reforms in Part 4 of the 2024 Act, including standard demand forms and annual reports, await commencement regulations, with at least 12 months' notice promised before they bite. Administration charges for consents and for the management pack a buyer needs must also be reasonable.
Lease length, mortgages and the 80-year problem
The number of years left on the lease is the single most important figure in a leasehold purchase. Many lenders will not lend on a lease with fewer than about 70 years remaining and some want 85 years or more, often with a further requirement that a set number of years remain after the mortgage ends; each lender's rules are published in the UK Finance Mortgage Lenders' Handbook.
The second threshold is 80 years. Once a lease has 80 years or fewer unexpired, the premium for extending it includes "marriage value", half of the increase in the flat's value that the extension produces, payable to the landlord. Dropping from 81 to 79 years can add thousands of pounds to the cost. The 2024 Act abolishes marriage value, but that provision has not been commenced, so as the law stands on 30 October 2026 it is still payable. Since 31 January 2025 you no longer need to have owned the flat for two years before serving a statutory notice, so a buyer can start the extension immediately after completion. The process, costs and timescales are covered in how to extend the lease on a flat.
If you are buying a flat with a short lease, negotiate a price reduction or have the seller serve the statutory notice before completion and assign its benefit to you. Leasehold purchases also take longer: how long conveyancing takes explains why 12 to 20 weeks is typical.
Leasehold houses, share of freehold and commonhold
Houses can still be sold leasehold: the ban on new leasehold houses in Part 1 of the 2024 Act is not in force, so check the tenure of any new-build house. Owners of leasehold houses have their own rights under the Leasehold Reform Act 1967 to buy the freehold or extend the lease by 50 years, and the two-year ownership rule was removed for them too in January 2025.
"Share of freehold" means the leaseholders of a block own the freehold together, usually through a company in which each flat owner holds a share. You still own your flat on a lease and still pay service charges, but the owners control the building, can usually grant themselves long extensions at no premium and keep ground rent at a peppercorn. Your solicitor should check that the freehold company is properly run and that the share transfers with the flat.
Commonhold, created by the 2002 Act, is freehold ownership of a flat with no lease, no landlord and no expiry, managed by a commonhold association owned by the unit holders. Very few exist. The draft Bill proposes to ban new leasehold flats, make commonhold the default for new blocks and let existing blocks convert with the agreement of 50% of leaseholders rather than all of them. Until it is passed and commenced, a new-build flat will almost always be sold leasehold.
Which leasehold reforms are in force in October 2026
Reporting often runs ahead of the law. The position on 30 October 2026 is as follows.
- In force: the peppercorn rule for new leases (30 June 2022); the removal of the two-year ownership requirement for lease extensions and freehold purchases (31 January 2025); and the right to manage changes, including raising the limit on non-residential floor space in a qualifying building from 25% to 50% and making each side generally bear its own costs (3 March 2025).
- Not yet in force: the ban on new leasehold houses; 990-year extensions, the abolition of marriage value and the other valuation reforms; the rule that leaseholders stop paying the landlord's costs of a claim; service-charge transparency and the ban on building insurance commissions; and rights for freehold estates. The government says the valuation reforms will follow as soon as possible from 2027.
- Proposed only: the £250 ground-rent cap, the abolition of forfeiture, the ban on new leasehold flats and easier conversion to commonhold in the draft Bill.
Scotland has no comparable system: residential leases of more than 20 years cannot be granted there, and the remaining ultra-long leases were converted into ownership under the Long Leases (Scotland) Act 2012.
Questions to ask before you buy a flat and what the solicitor checks
Ask the agent for written answers before you offer:
- How many years are left on the lease?
- What is the ground rent, and does it increase? If so, how and when?
- What was the service charge in each of the last three years, is there a reserve fund, and are any major works planned or under section 20 consultation?
- Who is the freeholder and who manages the building? Is there a residents' management company or a right to manage company?
- Are there any disputes, arrears or tribunal cases involving the building?
- For a building of 11 metres or five storeys or more, what is the cladding position, and does the flat have Building Safety Act 2022 protection?
Your conveyancing solicitor then reads the lease and reports on the term, the rent, repairing and insurance arrangements, restrictions on use, alterations, pets and letting, and any defective clause a lender will not accept. They obtain the management pack (the LPE1 form with accounts, budgets, insurance and any section 20 notices), raise enquiries, check building safety documents and deal with the landlord's notice requirements at completion. Property solicitors in London see the most leasehold work, but firms everywhere do it, typically for a few hundred pounds more than a freehold purchase; see the legal fees for buying a house and the stamp duty rates on a flat purchase.
If you already own a leasehold flat and are in dispute about charges or management, a property solicitor can advise on a tribunal application, and the Leasehold Advisory Service (LEASE) offers free initial advice. Use the solicitors near me search or browse property solicitors in Manchester to find a firm that lists leasehold work.
Frequently asked questions
Is leasehold a bad way to own a home?
Not necessarily. A flat on a long lease with a peppercorn or token ground rent, a well-run building and reasonable service charges works well for most owners, and most flats in England and Wales cannot be bought any other way. The problems arise with short leases, escalating ground rents, poor management and high or unexplained charges, which is why the questions you ask before offering matter more than the label itself.
Can a freeholder refuse to extend my lease?
If you qualify under the Leasehold Reform, Housing and Urban Development Act 1993, the freeholder cannot refuse a statutory lease extension; they can only dispute the premium and the terms, which the First-tier Tribunal decides if you cannot agree. A freeholder is free to refuse an informal request, or to attach conditions to it, because that route is a private negotiation with no statutory backing.
What happens when a lease runs out?
In law the flat reverts to the landlord. In practice almost no lease is allowed to expire: owners extend long before then because the flat becomes unsaleable and unmortgageable as the term shortens. A leaseholder who is still living in the flat when a long lease ends usually has a right under the Local Government and Housing Act 1989 to stay on as an assured tenant paying a market rent, but the capital value is lost.
Do I pay ground rent on a new-build flat?
Not if the lease was granted on or after 30 June 2022 (1 April 2023 for retirement developments). The Leasehold Reform (Ground Rent) Act 2022 limits the rent on new long leases to a peppercorn, which is nil, and prohibits any administration fee for collecting it. If a developer or landlord has demanded a cash ground rent on a lease granted after those dates, the demand is unlawful and the money must be refunded.
Is share of freehold better than ordinary leasehold?
Usually, because the owners control the building, decide the service charge budget and can grant themselves long extensions without paying a premium to an outside landlord. It does bring responsibilities: someone has to run the freehold company, file its accounts and confirmation statements, arrange insurance and chase neighbours who do not pay. Disputes between co-owners can be harder to resolve than a dispute with a professional landlord.
Can I turn my leasehold house into a freehold one?
In most cases yes. The Leasehold Reform Act 1967 gives the owner of a leasehold house the right to buy the freehold (or to extend the lease by 50 years) for a price fixed by a statutory formula, and since 31 January 2025 there is no minimum period of ownership. Many landlords will also sell voluntarily. A solicitor and a valuer handle the notice, the price and the transfer, and the cost depends mainly on the ground rent and the years left on the lease.
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This guide describes the law in England and Wales as at 30 October 2026. It is general information, not legal advice about your situation; the law and the figures it quotes change, so check the position with a solicitor before acting. LawFirms.co.uk is a directory and does not provide legal services.