One of the most important decisions when buying a property is if you'll purchase a leasehold or freehold property. These two types of ownership determine your rights over the property and the land it sits on. In this guide, we’ll explore the key distinctions between freehold and leasehold, their pros and cons and an alternative option known as commonhold properties.
What does freehold mean?
Freehold ownership means that you own both the property and the land it sits on outright. This type of ownership is indefinite and provides the most control over your property. Most houses in the UK are sold as freehold properties, giving homeowners the freedom to manage and alter their property without needing permission from a third party.
As the freeholder, you're responsible for maintaining both the property and the land. This can be an advantage for those who value independence but might come with additional responsibilities, such as managing repairs and utilities.
What are the pros and cons of a freehold property?
Pros ✅ | Cons ❌ |
|---|---|
You own the property and land outright, without paying ongoing ground rent or service charges | Freehold properties are often more expensive than leasehold ones, reflecting their greater value |
Freehold ownership allows you to renovate or modify your property as you see fit, within planning regulations | As the freeholder, you’re responsible for all maintenance, including structural repairs, roof upkeep, and garden care |
Unlike leaseholds, freeholds don’t have an expiration date, so you don’t need to worry about renewing or extending leases | |
You have full control over the property, making it easier to sell or pass on |
What does leasehold mean?
Leasehold ownership means you own the property (typically a flat) for a fixed period, but not the land it’s built on. Instead, you lease the property from the freeholder (also known as the landlord), who owns the land. The length of the lease is stated in the agreement, and it can range from 99 years to 999 years. When the lease expires, ownership of the property usually reverts to the freeholder unless the lease is extended.
💡Editor's insight
"In my experience, something that first-time buyers tend to overlook is that leasehold properties also come with extra charges. As a leaseholder, you may have to pay ground rent, service charges, and other fees to the freeholder. These charges cover shared services like maintenance of communal areas in a building."
What are the pros and cons of a leasehold property?
Pros ✅ | Cons ❌ |
|---|---|
Leasehold properties are often cheaper than freehold ones, making them more accessible to first-time buyers | You only own the property for the length of the lease, and restrictions may limit your ability to modify or sublet |
Maintenance and repair costs for shared areas are often divided among leaseholders, reducing individual financial burdens | Leaseholders typically pay ground rent, service charges, and possibly other fees, which can increase over time |
Leasehold ownership is common for flats, which are often located in desirable urban areas | Properties with short leases can lose value, making it harder to sell or remortgage |
As a leaseholder, you depend on the freeholder for decisions about the building, and disputes can arise over charges or maintenance |
How important is the length of a lease?
The length of the lease is a critical factor in determining the value and desirability of a leasehold property. In general, leases can be split into two categories:
Longer leases (over 80 years): Properties with leases longer than 80 years retain their value and are easier to sell or remortgage. A common question that buyers ask is if a 100 year lease is long enough, this will all come down to your situation and personal preference.
Shorter leases (under 80 years): When a lease drops below 80 years, it becomes less attractive to buyers and lenders. Extending such leases can be expensive due to 'marriage value', which compensates the freeholder for the increased property value after the extension.
Can you extend a lease?
Yes, leaseholders have the right to extend their lease under the Leasehold Reform Act 1993. Extending your lease can add value to your property and make it easier to sell. An experienced lease extension solicitor can help guide with the legal process.
💡Editor's insight
"I've seen a lot of buzz around '999-year leases' - are they worth it? It depends on your situation. Just remember, having a long lease isn't the same as owning a freehold property and doesn't have any extra benefits. You just have the peace of mind that you won't have to extend the lease anytime soon."
5 key differences between a freehold and a leasehold property
Let’s break down the five key differences between freehold and leasehold properties. You can also work out how to check if a property is freehold or leasehold in our full guide.
Aspect | Freehold | Leasehold |
|---|---|---|
Ownership | Indefinite | Fixed lease term |
Control | Full control | Limited by lease terms |
Costs | No ongoing costs beyond upkeep | Ground rent, service charges, fees |
Maintenance | Sole responsibility | Shared or managed by freeholder |
Resale/Mortgaging | Straightforward | Potential challenges with short leases |
1. Ownership duration
Freehold: As the freeholder, you own the property and the land it’s built on indefinitely. There’s no expiry date or renewal required, giving you full control for as long as you choose to own it.
Leasehold: You only own the property for the duration of the lease. Once the lease expires, ownership typically reverts to the freeholder unless you extend the lease.
2. Control over the property
Freehold: You have complete autonomy over your property. You can renovate, alter or expand (subject to planning permission) without needing permission from anyone else.
Leasehold: Your ability to make changes to the property may be restricted by the lease terms. For example, you may need the freeholder's permission to undertake major renovations or even minor modifications.
3. Ongoing costs
Freehold: Freeholders generally have no ongoing costs apart from property maintenance and taxes.
Leasehold: Leaseholders usually have to pay ground rent, service charges, and potentially additional fees for permissions or alterations. These costs can increase over time, adding to the long-term expense.
4. Responsibility for maintenance
Freehold: As the freeholder, you are solely responsible for maintaining the property and the land it’s on, including any structural repairs, gardens, or external features.
Leasehold: Maintenance of communal areas (e.g., hallways, roofs, or gardens in flats) is typically the responsibility of the freeholder. Leaseholders contribute to these costs through service charges. However, leaseholders may still be responsible for maintaining their own unit.
5. Ease of selling or mortgaging
Freehold: Freehold properties are generally easier to sell and mortgage because they don’t come with the complications of a lease. Buyers and lenders value the long-term security that freehold offers.
Leasehold: Selling or remortgaging a leasehold property can be more complex, especially if the lease term is below 80 years. Short leases often deter buyers and may require expensive lease extensions to retain value.
What are commonhold properties?
Commonhold is an alternative form of property ownership introduced in the UK to address some of the challenges of leasehold. Typically, commonhold properties let you own a unit within a building or estate and share ownership over communal areas. It is mainly used for flats and other properties with shared facilities. While commonhold offers greater autonomy and fairness, it remains relatively rare in the UK due to limited adoption and awareness.
Some of the key features of a commonhold property include:
Ownership: Each property owner owns their unit outright and shares ownership of common areas, such as hallways or gardens.
No lease: There is no time limit on ownership, and no lease means no ground rent or lease expiry concerns.
Management: Property owners collectively manage the building through a commonhold association, avoiding reliance on a freeholder.
Conclusion
Understanding the difference between leasehold and freehold ownership is essential for navigating the UK property market. By weighing the pros and cons of freehold and leasehold properties, you’ll be better equipped to make an informed decision that aligns with your financial goals and lifestyle preferences.
If you need legal advice on freehold or leasehold properties, get in touch with our property law solicitors today.
References
Leasehold property from Gov.UK
How to lease from Gov.UK
Commonhold from Lease Advisory Service