Leasehold vs Freehold: The Plain-English Guide

When you buy a home in the UK, you're not just buying a building, you're buying a specific type of legal ownership. And in England and Wales, almost every home is either freehold or leasehold. The difference can mean tens of thousands of pounds over the life of the property, and it affects whether your home is even mortgageable at all. Here is what each one is, the traps to spot before you offer, and what's changed under the Leasehold and Freehold Reform Act 2024.

Freehold in plain English

If you own a property freehold, you own the building and the land it sits on, forever. No clock ticking down. No ground rent. No landlord. Most houses in England and Wales are freehold, that's the default ownership type buyers expect, and what lenders prefer.

Practically, freehold means you don't pay anyone for the right to live there, and you don't need anyone's permission to alter the building (within planning and building-regs rules, of course). When you come to sell, the buyer takes on the same outright ownership. It's the simplest, cleanest form of property ownership in the UK.

Leasehold in plain English

If you own a property leasehold, you don't own the bricks and land outright. You own the right to live there for a fixed number of years, set by the lease, a long-term legal contract with whoever owns the freehold (the freeholder, also called the landlord).

Almost every flat in England and Wales is leasehold (because the building, stairwell and roof are shared). Until the late 2010s some houses were also sold leasehold, especially on new-build estates, a practice the government has since clamped down on under the Leasehold and Freehold Reform Act 2024.

Leases are typically 99, 125, 250, 990 or 999 years from when first granted. The clock has been ticking ever since, so the years remaining on the lease are what actually matter when you're buying.

The leasehold house scandal, and why it still matters

It's worth saying clearly: not every leasehold property is a flat. Throughout the 2010s, big house-builders started selling new-build houses as leasehold, particularly on estates in the North-West, the Midlands and parts of the South-East. Buyers signed up to what they assumed was a freehold purchase, only to discover later that they owned the bricks but not the land, and that the freehold had been sold on to an investment company.

The worst examples carried doubling ground rent clauses, the rent doubled every 10 years, turning a £250-a-year charge into £8,000 by year 50. Lenders refused to mortgage the homes once the issue became known, and owners trying to buy their freehold were quoted £30,000, £40,000, sometimes more. Whole streets became effectively unsellable. It was a genuine scandal that the Competition and Markets Authority investigated, and several developers ended up settling with regulators.

Two things have changed since:

• New leasehold houses are now effectively banned. The Leasehold and Freehold Reform Act 2024 makes it illegal to sell most new houses as leasehold (with very narrow exceptions like retirement housing). If you're buying a brand-new house in 2026, it should be freehold by default.
• Existing leasehold houses still exist and trade. If you're buying a second-hand property, especially anything built 2005-2020 on a new-build estate, check the tenure carefully. The seller may have it described as a 'house' on the listing but you may still inherit the lease.
• You have a statutory right to buy your freehold. After owning a leasehold house for two years, you can compel the freeholder to sell you the freehold at a formula-based price (the Leasehold Reform Act 1967, strengthened by the 2024 reforms). It's not free, but it removes the ongoing ground rent and any future hassle.

Why lease length matters for mortgages

Lenders look at unexpired lease years very carefully. As a rough rule of thumb across UK lenders:

Each lender sets its own rules, but if a property has fewer than about 80 years left on the lease, you're entering risky territory: it's harder to get a mortgage, harder to sell, and, thanks to a quirk called marriage value, historically much more expensive to extend. The Leasehold and Freehold Reform Act 2024 abolished marriage value on lease extensions, but the wider point still stands: short leases hurt your options.

• Above 90 years remaining: most lenders are comfortable.
• 80 to 90 years: still mortgageable, but mainstream lenders may require extension before completion.
• Below 80 years: serious mortgage difficulties; many lenders refuse, others lend only if the lease is extended on the day of completion.
• Below 70 years: almost unmortgageable, even with specialist lenders.

Ground rent and service charges

Two recurring costs come with leasehold ownership and they catch buyers out routinely.

Ground rent is an annual fee paid to the freeholder. Historically modest, ground rent became toxic in the 2010s when some new-build developers wrote in doubling-clauses (e.g. the rent doubles every 10 years), which made the homes unmortgageable. The Leasehold Reform (Ground Rent) Act 2022 wiped ground rent down to a peppercorn (i.e. effectively zero) on most new long leases. Older leases still carry whatever was originally written.

Service charges pay for shared building costs, lift maintenance, cleaning, communal lighting, buildings insurance, sometimes a sinking fund for the roof. These vary wildly: a few hundred pounds a year on a small block is normal; in a modern apartment with a concierge and gym it can be several thousand. Before you offer, get a copy of the last three years of service charge accounts so there are no nasty surprises.

What the Leasehold and Freehold Reform Act 2024 changed

Passed at the end of the last Parliament and being phased in since, the Act made several improvements for leaseholders:

Some elements of the Act are still being implemented through secondary legislation, and a further Leasehold and Commonhold Reform Bill has been promised, but the direction is clear: leasehold ownership in England and Wales is becoming less of a one-sided deal than it once was.

• Standard lease extension lengths are now 990 years on flats (and on houses).
• Marriage value on lease extensions, the premium charged when the lease falls below 80 years, has been abolished.
• It is now harder for new leasehold houses to be sold.
• Leaseholders have stronger rights to challenge unreasonable service charges and to take over management.

Share of freehold, the hybrid

Share of freehold is a setup you'll see most often in converted houses split into two, three or four flats. You own your individual flat on a long lease, AND you collectively own (with your neighbours) the freehold of the whole building, usually via a small company that the flat owners are all directors of.

The big advantage is control: you and the other flat owners decide service charges, building works and whether to extend the leases (which you can effectively do for free between yourselves). The downside is shared responsibility, if your fellow flat owners are difficult, building decisions stall. For most buyers, share of freehold beats traditional leasehold.

Commonhold, what it is and why it's rare

Commonhold is a third ownership type, introduced in 2002 to replace leasehold for flats. Each flat is owned outright (no lease, no freeholder), and shared parts are run by a commonhold association of all the flat owners.

It barely got used. Developers preferred selling leasehold (and keeping freeholds as assets), and there's no lease to expire. Government policy is now pushing to revive commonhold for new builds. If you see it in the wild, treat it as broadly similar to share of freehold in practical terms.

Buying leasehold: what to check before you offer

If a property you're interested in is leasehold, ask the estate agent and, once your offer is accepted, your conveyancing solicitor for the following:

• Years left on the lease, anything under 90 is a flag.
• Ground rent, current amount and how it changes (doubling clauses are red flags).
• Service charges, last three years of accounts, current year's budget.
• Sinking fund / reserve fund, is there money set aside for major works?
• Planned major works, a Section 20 notice for a new roof can land you with a £15,000 bill.
• Restrictions, pets, subletting, alterations, short-lets (Airbnb usually banned).
• Buildings insurance, usually arranged by the freeholder and recharged to leaseholders.
• Cladding status, EWS1 forms for buildings over a certain height.

How this affects your mortgage application

Your mortgage application will dig into the lease details. The lender's valuer flags any short leases, and the underwriter checks ground rent terms and service charges to make sure the property is good security. If something fails, you typically get one of three outcomes: the lender pulls out, the lender lends but at a lower amount, or the lender will only proceed if the lease is extended on the day of completion (the seller pays).

If your application is on a flat or any leasehold property, Debbie at DS Financial will steer you toward lenders that are flexible with the specific lease length and ground rent structure of the property you're buying, most of the issues are predictable, and a good broker spots them before the application goes in.

Leasehold vs freehold isn't just a legal label, it shapes what your home costs to own, how easily you can sell, and whether you can get a mortgage at all. If you're weighing up a leasehold property, a chat with a broker who understands the specific lender appetites is the difference between a smooth purchase and a nasty surprise three weeks in. Debbie at DS Financial has handled hundreds of leasehold mortgages and can flag the lease issues before they hit the lender's desk.

General information about UK property ownership in England and Wales, not financial or legal advice. Property law in Scotland (different ownership structures) and Northern Ireland differs. Always take advice from a qualified conveyancing solicitor on the specific property you're buying. Your home may be repossessed if you do not keep up repayments on your mortgage.

Sources: GOV.UK, Leasehold property, MoneyHelper, Leasehold vs freehold, Leasehold and Freehold Reform Act 2024, GOV.UK, HomeOwners Alliance, Leasehold properties.