Leasehold vs freehold: What’s the difference and what are the key considerations?

If you’re buying property in the UK, it’s essential that you understand the difference between a freehold property and a leasehold property. We’ve covered the fundamental differences below.

What is a freehold property?

A freehold property grants the homeowner full ownership of the building, its land and the space above the property. Most houses in the UK are freehold properties. Owners of freehold properties are responsible for the entire maintenance of the building and the land it sits on, but they don’t have to pay ground rent or service charges.

Buying a freehold property typically incurs lower conveyancing fees than purchasing a leasehold property. This is because the ownership contract is much simpler for freehold properties.

What is a leasehold property?

A leasehold property grants ownership of the property but not the land it sits on, or even the structure of the building. The landlord owns the land or the building structure. This is most common in a block of flats.

Owners of leasehold properties typically pay ground rent, service charges and maintenance fees but the landlord is responsible for maintaining the building structure and common areas, such as a building foyer or lift.

What is the lease?

The lease usually refers to the length of time the owner has a lease of the property or land the property is built on, which is initially 99 or 125 years but can be less if it hasn’t been renewed recently. You must pay (often significant amounts) to have a lease renewed, but laws on leaseholds have recently changed in favour of leasehold property owners (The Leasehold Reform 2022). Owners do have a right to extend their lease but may wish to seek legal advice as part of the process.

The lease length is stated within the lease document, which will include other details such as:

• The amount of ground rent due each month or year, which can be subject to change
• The amount of service charges due each month or year, which can be subject to change
• Obligations on the owner and landlord’s part, often regarding the use of common areas

What is a commonhold?

As part of the Leasehold Reform Act, commonhold properties were introduced as a potential alternative to leasehold properties. This is where each flat owner is the freehold owner of their flat and collectively all property owners are the owners of an association that manages the maintenance of the building. However, there are few examples of commonhold leases in the UK.

Freehold vs leasehold (Quick summary)

The main differences between freehold and leasehold properties are:

• With a freehold property, you own the land it sits on and the building structure, which isn’t the case with leasehold properties.
• Freehold property owners must pay all costs for the upkeep of their home and the land it sits on, but leasehold property owners may pay their landlord ground rent and service charges to cover these costs. 
• Leasehold property owners have a lease of ownership on their property, or land the property is on, which needs to be renewed at their own expense.
• Conveyancing costs to help purchase a freehold property can be cheaper due to more straightforward ownership contracts.