What Is the Difference Between Leasehold and Freehold?

Buying a property comes with plenty of new terms to understand, and one of the most important is whether a home is leasehold or freehold.

The difference may sound simple, but it can affect how long you own the property, what ongoing costs you may have, who is responsible for repairs and even how easy the property could be to sell in the future.

So, what does leasehold and freehold actually mean, and which type of ownership is right for you?

A freehold property means you own the property and the land it stands on with no time limit.

You are responsible for maintaining the property, the land and any private outdoor space. You also have more control over the home, although planning permission and building regulations may still apply if you want to make major changes.

Most houses in England and Wales are freehold, although some houses are sold as leasehold.

Buying a freehold property usually means:

• You own the property and the land indefinitely
• There is no freeholder or landlord to deal with
• You do not usually pay ground rent
• You have greater control over the maintenance and use of your home
• You are responsible for arranging your own buildings insurance
• You can make alterations, subject to the relevant planning and building regulations

However, owning the freehold also means you are responsible for the cost of maintaining the property. This could include repairs to the roof, exterior walls, driveway, garden and other parts of the home.

While there may not be regular service charges, it is still important to budget for future maintenance and unexpected repairs.

A leasehold property means you own the right to live in and use the property for a fixed period of time, rather than owning the property and land indefinitely.

The land and, in many cases, the wider building are owned by the freeholder, sometimes referred to as the landlord.

Leasehold ownership is most common with flats and maisonettes. You own your individual home for the length of the lease, but you usually do not own the building itself or the shared areas around it.

Lease lengths can vary significantly and may originally be granted for anywhere between 90 and 999 years.

When the lease eventually expires, ownership of the property can return to the freeholder. However, leaseholders may have the right to extend their lease, depending on their circumstances and the type of property.

The main difference is what you own.

With a freehold property, you own:

• The property
• The land it stands on
• The property with no fixed end date

With a leasehold property, you own:

• The right to occupy the property for a set number of years
• Your individual home, subject to the terms of the lease
• No automatic ownership of the land or wider building

There can also be differences when it comes to costs and responsibilities.

Freehold owners are generally responsible for arranging and paying for their own maintenance. Leasehold owners may pay service charges to contribute towards the upkeep of shared parts of the building or development.

Leasehold properties often come with additional costs known as service charges.

These charges vary from one property to another and are usually used to pay for the maintenance and management of shared areas.

Service charges may contribute towards:

• Maintaining communal hallways, stairways and gardens
• Cleaning shared areas
• Electricity for communal spaces
• Repairs to the roof or exterior of the building
• General building maintenance
• Buildings insurance, where arranged by the freeholder or managing agent

Some leasehold properties may also have ground rent or administration charges.

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

As the lease gets shorter, the property may become more difficult to sell or remortgage. Some mortgage lenders may be less willing to lend on properties with a short lease.

A lease with fewer than 80 years remaining can be particularly important to investigate, as the cost and complexity of extending the lease may increase.

The remaining lease length can affect:

• The value of the property
• The number of mortgage lenders available
• How easy the property may be to sell
• The potential cost of extending the lease

Always ask for the exact number of years remaining.

In many cases, leaseholders may be able to extend their lease.

The cost will depend on several factors, including the property’s value, the number of years remaining on the lease and the terms of the existing agreement.

You may also need to pay for professional advice, including legal and valuation costs. In some situations, you could also be responsible for certain costs incurred by the freeholder.

Most houses are freehold, but this is not always the case.

Some houses are sold as leasehold, meaning you own the property for the length of the lease but not the land it stands on.

Leasehold houses may have additional costs, such as ground rent, service charges or estate management fees.

Even some freehold homes can have ongoing charges if they are part of a development with shared roads, green spaces or communal facilities.

A flying freehold is where part of a freehold property extends over or underneath land or another property that is owned by someone else.

Examples can include:

• A room built above a shared passageway
• A property that extends over part of a neighbouring home
• A basement or vault that sits underneath another property
• An archway providing access to a rear courtyard

Flying freeholds are not necessarily a problem, but they can sometimes make legal responsibilities and maintenance more complicated.

Commonhold is another form of property ownership designed mainly for buildings with multiple homes.

Under commonhold, each homeowner owns the freehold of their individual property. The shared areas are owned and managed collectively through a commonhold association.

This can give residents more control over how the building is managed and maintained.

Commonhold is less common than leasehold in England and Wales, but it is another type of property ownership that buyers may come across.

There is no single answer because the right option depends on the property and your circumstances.

A freehold property may offer greater control and fewer ongoing management costs. However, you are responsible for organising and paying for all maintenance yourself.

A leasehold property can be a practical option, particularly when buying a flat. Shared maintenance may be organised for you, but you will need to understand the lease terms and any service charges or additional costs.

Before buying a leasehold property, make sure you understand:

• How many years are left on the lease
• The current service charge and what it covers
• Whether there is any ground rent
• Whether service charges are expected to increase
• If any major repair work is planned
• Who manages the building
• Whether there are restrictions on pets, alterations or renting out the property
• The likely cost and process of extending the lease

Your solicitor will review the legal documents during the conveyancing process, but asking these questions early can help you avoid unexpected costs.

For more information, please get in touch with us, and we'd love to answer any questions you have.