Freehold vs leasehold: what the tenure means

Tenure is the legal basis on which you own a home. In England and Wales it is usually one of two things, and the difference between them changes what you are buying, what it costs to run and how easy it will be to sell.

Freehold

Own the freehold and you own the building and the land it stands on, indefinitely. There is no landlord above you, no lease to run down, no ground rent and no service charge unless the estate has a separate arrangement for shared roads or grounds. Most houses are sold freehold.

The responsibility is the other side of the coin: the roof, the walls and the drains are yours, and nobody sends a schedule of works or collects a reserve fund on your behalf.

Leasehold

Buy a leasehold property and you buy the right to occupy it for a fixed number of years, set out in the lease. The freeholder retains ownership of the building and the land. Terms of 99, 125 or 999 years are all common. Most flats are leasehold, because a building of flats needs somebody responsible for the structure and the common parts.

A lease is a long contract and it is worth reading properly. It will say what you pay, who maintains what, whether you may alter the flat, sublet it or keep a pet, and what happens if the service charge is not paid.

Two ongoing costs come with it. Ground rent is a payment to the freeholder for the land; under the Leasehold Reform (Ground Rent) Act 2022, most new residential long leases in England and Wales may only charge a peppercorn, meaning nothing of real value. Service charges cover maintenance, insurance and management of the building, and are usually variable, with major works consulted on separately.

The lease length question

The number of years left on a lease is the single figure to check first. A long lease behaves much like freehold ownership. A short one does not: as the term falls the flat becomes harder to mortgage and more expensive to extend, and lenders each have their own minimum. Below roughly eighty years, extension costs rise noticeably.

The rules on extending a lease and on buying the freehold collectively have been reformed in recent years and parts of that reform have been brought in gradually. If a lease length is in play, take advice from a solicitor who does this work regularly rather than relying on a general summary, and get the current position from GOV.UK.

Share of freehold and commonhold

Some flats are advertised as share of freehold. The flat is still leasehold, but the leaseholders collectively own the freehold company, so they control the management and can extend their own leases on sensible terms. It is usually a better position to be in, provided the neighbours can agree on repairs.

Commonhold is a separate tenure that avoids leases altogether. It exists in law and has been the subject of reform proposals, but it remains rare in practice.

Scotland is different

Scots property law does not work this way. Residential property in Scotland is owned outright, feudal tenure having been abolished, and shared maintenance in a tenement or a development is dealt with through title conditions and factoring arrangements rather than a lease. If you are moving between the two systems, do not assume the vocabulary carries over.

Before you offer on a leasehold flat

Ask for the lease length, the current ground rent and service charge, the last three years of accounts, whether a reserve fund exists, and whether any major works are planned or have been consulted on. The answers are ordinary questions that a competent seller or agent will have to hand, and they tell you more about the true cost of the flat than the asking price does.