Around 4.5 million homes in England are leasehold. Most flats are leasehold by necessity — when multiple homes share one building, someone needs to own and manage the structure. But many houses have been sold as leasehold too, particularly by volume housebuilders, and this has caused significant problems for buyers who didn't fully understand what they were committing to.
Freehold explained
If you own the freehold, you own the property and the land it sits on outright, with no time limit. You're responsible for all maintenance and repairs. There's no ground rent, no service charge, and no permission needed for alterations (beyond planning permission and building regulations). Most houses in the UK are freehold.
Leasehold explained
A leasehold means you own the right to occupy the property for a set number of years — the lease term. When the lease runs out, ownership reverts to the freeholder. You don't own the land; you essentially rent it from the freeholder through ground rent payments. The freeholder (or a management company) manages the building and charges you a service charge for maintenance, insurance, and communal areas.
New leases are typically granted for 99, 125, or 999 years. A 999-year lease is functionally almost the same as freehold. A lease with 80+ years remaining is generally fine for mortgage purposes and property value. Below 80 years, problems start.
Why lease length matters
As a lease gets shorter, the property becomes harder to sell and harder to mortgage. Many lenders won't offer a mortgage on a lease with fewer than 70-80 years remaining. A short lease also reduces property value — the closer the lease gets to expiry, the less the property is worth.
Critically, extending a lease becomes much more expensive once it drops below 80 years. That's because below 80 years, the freeholder is entitled to a share of the property's "marriage value" — the increase in value that the extension creates. This can add tens of thousands to the extension cost. Extending before you hit 80 years is significantly cheaper.
Ground rent
Ground rent is an annual payment to the freeholder. Historically, it was a token amount — a peppercorn (literally nothing). But some modern leases include ground rent that doubles every 10 or 25 years, which can escalate to thousands of pounds annually. Escalating ground rent has been one of the most controversial aspects of leasehold.
The Leasehold Reform (Ground Rent) Act 2022 capped ground rent on new leases granted after 30 June 2022 to a peppercorn (zero). But this doesn't help people already locked into older leases with escalating ground rent. Reform of existing ground rents has been promised but not yet legislated.
Service charges
The service charge covers the cost of maintaining the building — cleaning, repairs, insurance, lift maintenance, communal lighting, gardening, and management fees. Charges vary enormously, from a few hundred pounds a year for a small block to several thousand for a large development with a concierge, gym, or swimming pool.
You have the right to see a breakdown of what you're paying for and to challenge unreasonable charges. The First-tier Tribunal (Property Chamber) can rule on whether charges are reasonable. If you're buying a leasehold property, review several years of service charge accounts before committing — unexpected major works bills (a new roof, cladding remediation) can run to tens of thousands per flat.
Lease extensions
If you've owned your flat for at least two years, you have the legal right to extend your lease by 90 years on top of the remaining term, and reduce the ground rent to zero. The cost depends on the property value, remaining lease term, and ground rent level. Expect to pay at least several thousand pounds for a lease with 80+ years, and potentially £20,000-50,000+ for shorter leases.
The process involves serving a formal notice on the freeholder, who must respond with a counter-offer. If you can't agree, the Tribunal decides the price. You'll need a specialist surveyor to handle the valuation.
Buying the freehold (enfranchisement)
Flat owners can collectively buy the freehold of their building — this is called collective enfranchisement. You need at least half the flats in the building to participate, and the building must meet certain criteria. It gives residents control over management, maintenance, and future lease extensions (which become much cheaper). The process is complex and requires a solicitor with enfranchisement experience.
House owners with a leasehold have the right to buy the freehold individually, typically at a price based on the value of the ground rent and the length of the remaining lease.
Upcoming reforms
The government has committed to significant leasehold reform, including making it cheaper and easier to extend leases, reforming the calculation of lease extension and enfranchisement costs, potentially banning leasehold for new houses entirely, and addressing the cladding crisis where leaseholders have been charged for remediation of dangerous cladding.
The Leasehold and Freehold Reform Act 2024 is being implemented in stages. Keep an eye on GOV.UK for the latest implementation dates, as the details and timing continue to evolve.