Freehold vs leasehold: what you own and what it costs

Buying a home in England, Wales or Northern Ireland usually means buying one of two things. With a freehold you become the sole owner of both the building and the land it stands on, and there is no lease term, so your ownership has no set end date¹. With a leasehold you own the property for a set number of years under a lease, but not the ground or the building it sits on, and whoever owns the freehold is your landlord¹.

The split follows the property type. Most houses are sold freehold and most flats leasehold, and in England an estimated 94% of owner-occupied flats are leasehold against 71% of privately rented flats⁵. Around 30% of leasehold homes in England are houses, so leasehold houses exist, they are just the minority⁶.

What follows is what each tenure gives you, what a leasehold costs on top of a mortgage, how long a lease needs to be for a lender to accept it, and what happens as the years run down.

Freehold or leasehold: what you actually own

A freehold is the simplest form of ownership. In England, Wales and Northern Ireland it is a legal title proving ownership of a plot of land and all structures within it, and when you buy one you become the sole owner of both the building and the land it stands on¹. There is no lease term, so ownership does not have a set end date, and no ground rent, service charges or permission fees apply. What replaces them is direct responsibility: you pay for any maintenance, repairs or upkeep yourself¹.

A leasehold is different in kind, not just in cost. You have the right to live in the home for a set number of years specified on the lease, but you do not own the land it stands on¹. The lease is a contract between you and the freeholder, and it sets out what you may and may not do. Because you are a tenant of the freeholder, you pay them ground rent, and disputes can be referred to them⁴.

There is a middle position. In some blocks of flats the leaseholders also share ownership of the building itself, known as a share of freehold, so you own the property leasehold plus a share of the freehold for the building¹. It is not a full escape from leasehold mechanics: a mortgage lender may still need to assess the lease even though you own a share of the freehold².

Shared ownership sits inside the leasehold world. Shared ownership properties are usually leasehold, meaning shared owners are leaseholders, and most shared ownership houses are leasehold too¹². If you want the detail on that route, shared ownership in England covers how the lease and the rent work together.

Leases usually run 99 or 125 years, and the clock matters

When a residential lease is first drawn up it usually lasts for up to 125 years, though leases of 99 years are common and it is possible to have one for up to 999 years¹. Right to Buy leases are typically granted for 125 years¹⁴. The number on the lease is not fixed for life: it counts down from the day it was granted, so a 125-year lease sold after 15 years leaves the buyer a 110-year lease¹⁴.

That countdown is the single most important number in a leasehold purchase, because it drives both value and mortgageability. A lease with fewer than 80 years remaining can seriously affect both the value of your property and the amount it will command, and many mortgage providers will refuse to lend on a property with fewer than 80 years left¹. One lender's guidance puts the difficulty at fewer than 80 years, another at fewer than 70, so the threshold is not identical everywhere⁸.

Ground rent, service charges and other leasehold costs

A leasehold usually carries two extra charges on top of the mortgage, paid monthly or every year: ground rent, which is rent for the ground your property sits on, and a service charge, which covers maintaining the building and grounds¹¹. You may pay service charges and, depending on your lease, ground rent or other charges². These can increase over time¹¹.

The service charge is the one that varies most. When you own a leasehold flat you will usually pay a service charge to your landlord or management company to maintain any common areas of the building, and it is normally apportioned to the number of units¹. Owner occupiers can face service charges too if the home was bought on a leasehold basis¹⁶. Leaseholders are also required by law to pay the freeholder's reasonable legal and own valuation costs when extending a lease¹⁷.

There is help in some circumstances. Owner-occupiers who are leaseholders may get help to pay service charges through the housing costs element of Universal Credit, subject to payment, liability and occupation conditions and provided neither they nor a partner has earned income¹⁹. If you own a leasehold property you may also be able to get help to pay some service charges and ground rent through a Support for Mortgage Interest loan²⁰. Falling behind on these charges is treated as a debt in its own right, and service and ground charge arrears sets out what happens next.

What a lease can stop you doing

A lease is a set of rules as well as a title. There could be clauses written into the lease that affect what you can do, for example pets, subletting or changing the layout⁴. Leaseholders have to get permission from the freeholder to make certain alterations to the property, and you may need permission for some changes depending on the terms of your lease¹. If you are a leaseholder and want to take in a lodger, you might also need permission from the freeholder²¹.

Shared ownership leases are tighter still. The standard shared ownership lease does not permit the leaseholder to sub-let or part with possession of the property in any other way until staircasing to 100% ownership²². In Wales the lease does not allow sub-letting at all, permitted only in exceptional circumstances for serving Armed Forces personnel with prior landlord approval, though lodgers are permitted²³. If you are considering that, can you rent out a shared ownership home goes through the conditions.

Reform is changing the balance. The Leasehold and Freehold Reform Act 2024 introduced changes designed to give leaseholders more rights and change the process for extending a lease or buying a freehold². The Act prohibits commissions from the placer or manager of insurance from being recovered from leaseholders through their service charge¹⁰. In its current form, later legislation would ban the use of leasehold for most new flats to make commonhold the default tenure, and new leasehold houses are being banned in England and Wales other than in exceptional circumstances, so every new house will be freehold from the outset¹. Failure to comply with the restrictions on new leasehold houses could result in a fine ranging from £500 to £30,000 per infraction¹⁰.

Getting a mortgage: lenders check the lease length

For a freehold, there is no lease for the lender to assess, although other property checks still apply². For a leasehold, lenders may consider the lease length, costs and terms before deciding whether to lend². That is why the 80-year mark matters so much: it is not only about value, it is about whether a buyer can get a mortgage at all¹.

Different lenders set their own rules. Equity release providers might want an unexpired term of at least 75 or 80 years²⁵. One lifetime mortgage product requires the remaining term plus the age of the youngest borrower at completion to be at least 175 years²⁶. Some lenders will ask for written confirmation from the freeholder or management company that all ground rent and service charges are paid and up to date before the mortgage offer is issued²⁷.

Two other structures need checking. A mortgage lender may need to assess the lease even where you own a share of the freehold². And with a flying freehold, where part of a property sits over land belonging to someone else, some lenders may need to check the ownership and legal arrangements before deciding whether to offer a mortgage².

If you are working out what you can borrow, mortgages covers how lenders assess affordability, and buying a leasehold property deals with the specific checks a leasehold purchase triggers.

When a lease runs out: ownership returns to the freeholder

A lease is a wasting asset. When the lease ends, ownership returns to the freeholder unless the lease is extended, and once the lease expires the ownership of the home reverts to the owner of the land⁷. Once the lease runs out, ownership of the entire property reverts back to the freeholder¹.

For a shared owner the outcome is harsher. If possession is ordered, the shared owner would lose their interest in the property and ownership would return in full to the landlord, and they would also lose any capital payment made when the lease was granted²⁹. That is why shared ownership arrears is a serious situation rather than a payment hiccup.

In practice, very few leases are allowed to run to zero. The market expects a lease to be extended well before the 80-year mark, because a short lease is hard to sell and hard to mortgage¹. The alternative routes are set out below.

Extending your lease or buying the freehold: recent reforms

If you hold a short lease you may be able to buy the freehold, or a share of the freehold with other flat owners, or extend the term of the lease³⁰. The Leasehold and Freehold Reform Act 2024 reshaped all three routes².

The headline change is length. The Act gives tenants of houses and flats the right to a 990-year lease extension, increasing the standard term from 90 years for flats and 50 years for houses, with ground rent reduced to a peppercorn, meaning zero financial value, on payment of a premium¹. Leaseholders of flats and houses get the same right to extend as often as they wish, at zero ground rent, for a term of 990 years⁶. There is also a new right for leaseholders who already have very long leases, with over 150 years remaining, to buy out their ground rent¹⁰.

The two-year ownership rule is gone. Leaseholders no longer need to live in a property for two years before they can extend their lease or buy the freehold, and the requirement for a new leaseholder to have owned their house or flat for two years before benefiting was removed¹. The change took effect from 31 January 2025³¹.

Costs have moved too. Leaseholders extending their lease, buying their freehold or exercising their right to manage will no longer generally pay their freeholder's costs, with each party bearing their own¹⁰. The presumption for leaseholders to pay their freeholders' legal costs when challenging poor practice was scrapped⁹. The so-called marriage value, which makes it more expensive to extend leases when they are close to expiry, was removed⁹.

Other changes widen who can act. The non-residential limit preventing leaseholders in mixed-use buildings from buying their freehold or taking over management rose from 25% to 50% of floorspace⁹. Freehold homeowners on private and mixed tenure estates are to get the same rights of redress as leaseholders, including transparency over estate charges and the ability to challenge them at a tribunal, and freeholders who manage their property will be required to belong to a redress scheme⁹. Leaseholders are also to get greater transparency about service charges, with freeholders and managing agents required to issue bills in a standardised format¹.

What you pay for an extension depends on the value of the property, the number of years left on the lease, the annual ground rent, the value of improvements paid by the leaseholder and the expected rate of return on investments¹⁷. On top of the premium you pay for the extra years, there are legal advice, a lease extension valuation report, the freeholder's reasonable legal and own valuation costs, and Land Registry fees¹⁷. Government consultations on valuation rates and on who pays the costs of the enfranchisement process were published in July 2026, closing in September and October 2026³¹.

Scotland works differently

In Scotland, very few properties are sold as leaseholds, and land and property ownership is different from the rest of the UK¹. There is not the same issue with leasehold properties, as very few homes are sold with this type of ownership²⁴.

Lenders reflect that. Acceptable tenure is described as freehold or leasehold in England and Wales, or their Scottish equivalent, and Scottish properties must be absolute ownership or heritable³². Scotland's housing and tenancy laws can differ from the rest of Great Britain, which affects how rules work in practice²¹.

There is one quirk worth knowing if you own a share of the freehold in Scotland. The Financial Ombudsman Service can look at your complaint if all the freehold owners bring it together; otherwise it assesses the complaint as if you were a leaseholder³⁴. Repossession law in Scotland is also different from the rest of the UK³⁵.

If you are buying north of the border, buying a home in Scotland covers the process, and money in Scotland, Wales and Northern Ireland sets out where the rules diverge.