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Leasehold v Freehold – what’s the difference?

It may seem like technical legal language, but there are few things more important about your home than whether it is freehold or leasehold. It makes the difference between owning your own home outright, and having a landlord

What are the different forms of home ownership?

There are two fundamentally different forms of legal ownership: freehold and leasehold. Although estate agents tend to gloss over it, the difference can be between a home that is worth buying and one that isn’t. Many people who don’t sort this out when they buy a home end up regretting it – getting it wrong can be hugely expensive.

What is freehold?

If you own the freehold, it means that you own the building and the land it stands on outright, in perpetuity. It is your name in the land registry as “freeholder”, owning the “title absolute”. Freehold is pretty much always the preferred option: you can’t really go wrong with it.

  • You won’t have to pay annual ground rent
  • You don’t have a freeholder either failing to maintain the building, or charging huge amounts for it
  • You have responsibility for maintaining the fabric of the building – the roof and the outside walls
  • Whole houses are normally sold freehold

What is leasehold?

Leasehold means that you just have a lease from the freeholder (sometimes called the landlord) to use the home for a number of years. The leases are usually long term – often 90 years or 120 years but as high as 999 years – but can be short, such as 40 years.

  • A leaseholder has a contract with the freeholder, which sets down the legal rights and responsibilities of either side
  • The freeholder will normally be responsible for maintaining the common parts of the building, such as the entrance hall and staircase, as well as the exterior walls and roof. However, other leaseholders might have claimed their “right to manage”, in which case it is their responsibility
  • Leaseholders will have to pay maintenance fees, annual service charges and their share of the buildings insurance
  • Leaseholders normally pay an annual “ground rent” to the freeholder
  • Leaseholders will have to obtain permission for any majors works done to the property
  • Leaseholders may face other restrictions, such as not owning pets or subletting
  • If leaseholders don’t fulfil the terms of the lease – for example, by not paying the fees – then the lease can become forfeit

Disputes between leaseholders and freeholders

It is very common to have tension between freeholders and leaseholders.

  • Fees are a major source of contention, with leaseholders often feeling their freeholder is over charging, but being able to do little about it. While the ground rent usually costs in the region of £100-250, even on ordinary flats the annual charges can amount to over £1000 a year
  • Leaseholders often complain that freeholders don’t maintain the building to a sufficiently high standard, or keep common areas clean and tidy
  • Freeholders often complain that leaseholders breach the terms of their lease, for example by making too much noise or not getting permission for building works

The declining value of leaseholds

When the term of the leasehold goes down to zero years, then the property reverts to the freeholder. So, if you have a 40 year leasehold, you only have the right to use the property for 40 years before it goes back to the freeholder. A lease with a term of zero years is clearly worthless, and all other things being equal, the shorter the lease, the less it is worth. The value of long leases stays fairly stable, but the value of short leases can drop rapidly. For example, a flat with a lease of 60 years is worth more than 10 per cent less than if it had a lease of 99 years – you might think that a flat is worth £200,000, but actually it is worth less than £180,000, with the difference in value being owned by the freeholder.

Should I avoid buying a property on a short leasehold?

Leases of less than 90 years can start to be problematic for leaseholders, and should be approached warily. Certainly, any lease of less than 80 years can start to significantly affect the value of the house. If you have a short lease, the property can decline in value even if property prices in your area are generally rising. This means that fewer people will want to buy it when you resell; it also means that mortgage companies might be reluctant to lend on it.

For more advice on what to be aware of when buying a home see our Step by step guide to buying your home

Extending your lease

A series of Government acts have given leaseholders protection against short leases, by giving them the right to extend their lease or the right to buy the property – but this can be very expensive indeed. The law is slightly different depending on whether you have a house or flat:

Flat:

  • You normally have the right to extend your lease by 90 years on top of your unexpired term
  • If so you won’t have to pay any more ground rent and you can negotiate new terms for the lease, like who pays for works on the flat
  • However, you only have the legal right to do this if you have held the lease on the property for 2 years and it was originally leased on a “long lease”, usually more than 21 years.
  • You will have to pay a premium for extending the leasehold.
  • Many people considering buying a short leasehold property (generally less than 80 years) insist that the leaseholder extends the lease before they buy it.
  • After you tell your landlord that you qualify for the right to extend the lease they can accept your offer, negotiate, or reject your offer. If they do the latter you can challenge them in court

House:

  • You might have the right to extend your lease by 50 years on your house
  • If so you can renegotiate the terms of your lease, like who pays for works on the house
  • However, you only have the legal right to do this if you have held the lease on the property for 2 years and it was originally leased on a “long lease”, usually more than 21 years
  • Unlike flats, you don’t have to buy a lease extension for a house, but your ground rent is likely to go up
  • You should get a professional to help you extend the lease. For example, if you live in a converted house the rules for extending a lease on a flat might apply instead
  • After you tell your landlord that you qualify for the right to extend the lease they can accept your offer, negotiate, or reject your offer. If they do the latter you can challenge them in court

Want to know more? Take a look at Should I extend my lease? and our Step by step guide to extending your lease 

Buying the freehold on a leasehold property

You might also have the right to buy your house or flat outright, so that you own the freehold. This is called ‘enfranchisement’. While there are complicated legal procedures and legal costs involved this process of enfranchisement can be invaluable. Again, the law depends on whether you have a house or flat. Ensure you get professional advice and assistance.

What is commonhold? 

    • Commonhold is a variant of freehold, created by the Leasehold Reform Act of 2002, which overcomes some of the worst aspects of leaseholds.
    • Commonhold is where a multi-occupancy building is divided into a number of freehold units, so each individual flat owns its own freehold. The common parts (staircases and hallways etc) are owned and managed by a Commonhold Association, a company that is itself owned by the freeholders of the flats.
    • This means there is no superior freeholder, but rather the owners of the flats manage the common and external parts of the property jointly. This protects people both from greedy landlords, and from the problems of short leases.
    • But, as with any form of community ownership, problems and conflicts can arise between members of the Commonhold Association. Moreover, only about 15 to 20 commonholds have been completed in the UK.

The HomeOwners Alliance can provide guidance on extending your lease and buying the freehold on your flat. To see how we can help, find out more about the benefits of joining the HomeOwners Alliance.


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44 Comments

  1. Hi Beaux,

    One of our leasehold experts would be more than happy to answer your query if you were to join as a member. Joining is easy and only costs £45 for the year. Sign up easily online here

    Thanks,

    Sophie
    HomeOwners Alliance Team

    Comment by Sophie Khan — August 12, 2016 @ 2:06 pm

  2. My partner and I own a leasehold flat with a garden. It is clearly shown on our lease. We are now going through the legalities of up scaling to freehold ownership with our two Neighbours. There is a small patch of land which is on the other side of a fence at the top of our garden and is accessed by a side road. Our next door neighbours quite cheekily have been using this land for some years. Now that we are applying for the freehold, it has transpired the ground floor flat in our building has that patch of land on his lease. My question is, when the freehold goes through, will we loose part of our garden to give this neighbour right of way? Presently on our lease the garden is for our sole use, and there is no right of way.

    Help

    Many thanks

    Comment by Beaux — August 11, 2016 @ 9:26 pm

  3. Hi P Joyce,

    If you were to join us a member we would be more than happy to go through your query.

    Thanks,

    Sophie
    HomeOwners Alliance Team

    Comment by Sophie Khan — August 11, 2016 @ 1:55 pm

  4. I own my house which is freehold but is subject to £10 per yr ground rent. Is this still payable?

    Comment by P Joyce — August 11, 2016 @ 8:59 am

  5. Hi, I’m looking at getting a mortgage on a freehold flat, however I would become the buildings manager and own the land. The upstairs flat would apparently pay me ground rent and pay towards the home insurance.

    The upstairs flat is leasehold and has 78 years left. Would you be able to explain what that would mean for me? Would I be in anyway liable for extended their leasehold etc?

    Thanks for any info!

    Comment by Damien T — July 30, 2016 @ 10:01 pm

  6. We have a lease hold apartment but have a mortgage. What happens when the leasehold runs out. We pay a ground rent to one company and a maintenence fee to a management company. The ground rent does not cover any grounds or maintenence work. Should we look to buy leesehold

    Comment by Peter A — April 9, 2016 @ 7:35 pm

  7. What is the point of buying flat on leasehold, getting a mortgage, paying almost double the property value to the bank, paying the maintenance and other charges to freeholder, being restricted to do anything with your flat, not having permit to keep animals, etc and in fact NOT REALLY OWING the property you paid for, as in 90 years it will go back to the freeholder. You pay mortgage all your life, you do not go for nice holiday or buy a nice car, because you have to pay your mortgage and you cannot afford any luxuries in your life and you cannot even pass the property to you kinds, because the leasehold will expire by the time they are 40 -50 y.o. What is the point of buying a property in this weird country???

    Comment by Lukas — March 2, 2016 @ 8:33 pm

  8. My daughter is buying a house and garage that is in a block they were originally built as leasehold but the vendor bought the freehold he thought this was for both house and garage but it turns out only the house was transferred into lease hold
    He has contacted original solicitor who did this but it is taking forever is there anyway we can hurry this up or can you give us any idea how long this will take

    Comment by Wilson — February 15, 2016 @ 4:05 pm

  9. Hi
    I have a purpose built Maisonette worth approx. 250000 with 43 years left on the lease all 4 of the current owners wish to purchase the Freehold, I know the legal fees will be between 3 and 500 pounds but what is the rough cost of the Freehold for myself with only 43 years left ?

    Comment by Mark — February 11, 2016 @ 5:50 pm

  10. Hi, I am interested in a house but there are only 43 years left on the lease. If I buy it now and sell it after two years, whether there will be a high risk that the price of this property drop? Furthermore, it is a two-storeys house but divided by two leaseholders, one leaseholder owns the ground floor and the other owns the first floor. The one in the market is the ground floor one. The location and the outlook of this property is very good, however the lease really made me in a dilemma. What shall I do?

    Comment by Kun Bao — February 4, 2016 @ 11:31 pm

  11. 3 houses in a block on a hillside. Mine is freehold semidetached and has a flying freehold under part of the house behind. My semi detached neighbour bought his house with the other part of house behind which had a flying freehold. He was advised to buy a lease on the rear house. He did and in doing so where do I stand? My flying freehold is over120 years old. Should the leaseholder pay ground rent to me? He purchased the lease on the whole of the house behind. What rights do I have.?

    Comment by Dorothy. Wilson — January 31, 2016 @ 2:23 am

  12. I don’t understand why anyone would buy a leasehold property, because when the lease expires you’ve thrown your money away?

    Comment by Yvette Holloway — October 15, 2015 @ 10:09 am

  13. Hi – I am interested in a property however on the land registry it is showing as having both freehold & leasehold – is this possible a mistake online?

    Or is this entirely possible?

    Thanks

    Luke

    Comment by Luke Sweeney — October 13, 2015 @ 3:38 pm

  14. I’ve owned my home for 30 yrs, but pay ground rent or “a perpetual yearly rentcharge” (negotiated 2nd May, 1892), according to the Deeds, yet the property is Freehold?
    I’ve bought my house, but still have a low mortgage, Do I own my ‘own’ house or not? As one of your prev correspondents asked?

    Comment by Ged — October 7, 2015 @ 6:41 pm

  15. Hi – I live in a freehold house on a small development of 56 homes. The leasehold flats won right to manage back in 2012 but we are all still tied to a dreadful managing company who have appointed themselves as managing agents (nb they don’t actually manage anything). Costs have almost doubled in 7 years and we are now paying over £300 a year each for a small patch of grass to be mowed and 9 faulty bollard lights. Is there anyway we can replace this managing agent / company? Is there any regulation of the industry for freeholders? If not there needs to be as there are 100s of these companies demanding money for nothing and getting paid by threatening hard working people with legal action. Thanks in advance for any guidance. Emma

    Comment by Emma Carter — October 4, 2015 @ 7:20 am

  16. I am looking into buying a flat which is freehold and has one flat above which is leasehold. I understand there is a shared Buildings insurance policy but how do I find out what ground rent/service charge the leaseholder pays and what will I be responsible for e.g maintenance & repairs?

    Comment by Sue Whiteley — September 4, 2015 @ 2:52 pm

  17. I have just given permission to the next door neighbours to build an extension astride the party wall. The extension goes beyond the part wall by about 3 inches. Can I object to this and what legal process can I take?
    I own the Freehold on my property.

    Tom

    Comment by Tom — August 25, 2015 @ 1:18 pm

  18. Good morning

    I have been offered a price to buy a council Maisonette. We lived in this place for nearly 4 years and it is a good place. We had a very good offer for this property. The landlord is Sheffield City council.

    It is a leasehold for 125 years. My question is shall we go for it or not?

    Also after buying the lease do we need to pay a rent again?

    Kind regards

    Marco

    Comment by Marco — July 24, 2015 @ 9:34 am

  19. I bought my flat which is an ex Council property in 2002. I didn’t buy under Right to Buy Scheme but rather off someone who did. This is leasehold. No work has ever been undertaken in all the years I’ve lived here until this year when the Council undertook painting of external gates and downpipes and fitting a fence and new outhouse door. They didn’t inform me or consult me at all re this and now say I’m liable to pay for work I didn’t ask for or need after it’s been done. Any advice would be welcome. Thank you

    Comment by Anne Conlon — July 18, 2015 @ 11:29 am

  20. what does this mean?

    By a transfer made between seller and buyer the rent charge was informally apportioned as to £3 to the land in this title.

    Comment by sue mcnulty — May 21, 2015 @ 2:16 pm

  21. We have been offered the freehold on our house for £840 and we paid this back in march when we decided to move house & we agreed with our buyers that we would buy the freehold & as part of the contract transfer it over to them. We are still waiting for the freehold purchase documents & our purchasers & the owners of our house are threatening to pull out. We have contacted estates & management & they tell us there is nothing they can do to quicken up the process – we are ready to exchange when we get these documents & our solicitor will do the transfer! What can I do I am so stressed out.

    Comment by Jane — May 12, 2015 @ 4:39 pm

  22. we have lived in our new build house for 15 years and pay an annual ground rent to Shenstone Properties – who I have googled as I wanted to email them a question, only to find awful reports about them. In these 15 years, I send a cheque annually for £50 but otherwise have no contact at all. I admit to being totally lacking in any knowledge about what these companies do and why I pay them!? Ive read here about how they are responsible for common areas etc? I dont recall our solicitor going into any detail when we bought the property, My questions are – can I free myself from leasehold, and more importantly for now, it sounds like Im a tenant and dont own my own property that we have bought outright – can this be correct :(?

    Comment by angela — March 24, 2015 @ 11:52 am

  23. Hello
    Recently I would like to buy a house which is £125,000. The leasehold remained for 56 years, and the agent said I can but the freehold after two years. I also can arrange for a mortgage. Can you please advise me if it is going to worth buying that house and what can be the cost of I buy the freehold after two years.
    Thanks
    Nazmin

    Comment by Nazmin — March 19, 2015 @ 11:12 am

  24. We only have 54 years left on the lease for a flat that was left to me by my grandpa. The flat is one of 9 in a building. Is it better for me to extend the lease or go for the freehold?

    Comment by Jenny — March 18, 2015 @ 7:57 pm

  25. We have a piece of land that we bought from the local farmers. When we remortgaged our house, the building society include our land in with the house for the remortgage. Can they do this legally??

    Comment by Diane smith — March 15, 2015 @ 6:18 pm

  26. Hi I purchased a right to but property from a housing association freehold seven years ago. The deal was I could not sell before 5 years and I would be able to sell back to the housing association and I would get the market value.

    I emailed them asking my options and was advised to put it on the open market as they are not buying back houses now. I had no notification that they had changed the rules but they are still charging me maintenance fees. As they have changed the rules can I now refuse to pay maintenance fees?

    Comment by Felicia Walker — February 19, 2015 @ 9:29 pm

  27. We have a freehold flat in a freehold building. We’re the only owner-occupiers in our building. The other flats are let. Out of sudden we were asked to pay £1,500 for the fire risk assessment works as without this those owners who decided to let their flats (The landlords) won’t be able to get a permission to do it.. Are we under obligation to pay what they demand from us as it seems unfair on us as we aren’t getting any money from our flat?

    Comment by Anna — February 18, 2015 @ 7:49 pm

  28. My parents bought a leasehold property around 50 years ago they paid the ground rent for many year however something went wrong and they stopped receiving requests for the ground rent to be paid when they did finally receive a bill it was for around £10,000, for the ground rent. The house was sold, my parents went to court and were evicted. They believed due to the lease they had and showed the court they had around 30 years left on the lease. This was disputed and another lease was requested from the land registry and they where told they was a error on the schedule they had. What can they do about this? They thought their schedule was correct… Further to this my parents have continually tried to go to court to dispute the issue to no avail, please help with some advise…

    Comment by Ros — February 6, 2015 @ 8:31 pm

  29. The Crown Estate have just sold the freehold to four flats which form a block next to my house. However one of the flats is empty, and under the flats there are 11 garages. On selling the freehold, the Crown has also sold the 11 garages and the empty flat to the new freeholders (who own two of the flats). Does the Crown have the right to do this? My understanding is that selling a freehold does not guarantee the freeholder the right to buy leases in the property, in this case one empty flat and 11 garages. Many other Crown residents used to have licences to rent the garages which have now been revoked, and we have to pay 350% increase to the new freeholders. Is it legal to automatically sell the leaseholds on enfranchisement?

    Comment by coral jones — February 4, 2015 @ 7:46 pm

  30. Hi my mother has the freehold to land but cant find the certificate how do we get a new one or a letter of ownership we live in lurgan co armagh n ireland

    Comment by bronagh jordan — January 26, 2015 @ 8:39 pm

  31. Hi Alex, We just spoke. Dig out a copy of your leasehold agreement. If you would like us to look at it with you and put you in touch with our legal helpline, please join us today! Angela

    Comment by AKerr — January 21, 2015 @ 2:31 pm

  32. HI,
    I am new to this forum,
    I am a leasehokder of a flat (first Floor) in Newham Council. The lease specifies that i also own a small portion of garden. Recently, the council contacted me saying that they ned to take 400mm of the garden in order to build new flats on adjoining derelict land.
    My question is, i am entitled to ask to be compensated for losing the portion of land? if yes, how do i go about it?
    Thanks in advance for your advice,

    Comment by Alex — January 21, 2015 @ 2:21 pm

  33. Hi John, Check your leasehold agreement and see what it says about responsibility for sewerage. If you have any further questions simply join us so we can give it our full attention. Thanks, The HomeOwners Alliance team

    Comment by AKerr — January 21, 2015 @ 12:23 pm

  34. I bought a leasehold maisonette some 25 years ago.
    It is one maisonette in a block of 12 – previously council owned

    I pay £700 annually for sewerage, but I feel sure this is the freeholder (owners) responsibilty, should I challenge the bill?

    Comment by John — January 12, 2015 @ 11:04 am

  35. My freeholders latest scheme is to sell off the vistors parking car parking places, the flats are fairly new only completed in late 2013. Part of the original planning permission was that these spaces were there for visitors to the properties. I understand that he owns the land but would he be able to do this ?

    Comment by steve sanderson — December 15, 2014 @ 10:27 pm

  36. Hi, we found the perfect house, perfect location, perfect plot on a small new development in Oxfordshire. The house is detached, there is a maintenance charge as it’s a private road with public open space which we are happy to pay to ensure it looks pristine but have been told it’s leasehold for 999 years with the option to buy in 2 years? how on earth do we work out how much that would cost us in 2-3 years time? Or is this the future and we are just panicking as leasehold is not the norm at present on houses?
    Many thanks

    Comment by Louse — September 22, 2014 @ 9:52 am

  37. I am buying the house I have lived in for the last 25 yrs from a housing association, (Freehold). However,I am forced to pay service charges on a piece of common ground 20 yards away of £166 per year as a condition of sale.The house is number 2 of a block of 6 terraced houses. Numbers 1,3 and 5 were bought from the council” freehold” and no service charges imposed.
    It was later agreed at the time the council stock was sold to the housing association that I would not lose any of my rites due to this sale. Is the housing association playing fair with me,as should I sell in the next 10 yrs,this could affect the amount I could sell for or indeed if I could sell at all.

    Comment by Graeme. Judge. — September 9, 2014 @ 6:52 am

  38. My family own our home the land on which it sits has yearly ground rent. If we decided to rebuild on the site are we answerable to the land lord?

    Comment by M/S Katrina McKenna — July 14, 2014 @ 12:57 pm

  39. My sister and I have lived in the same house, divided into 2 separate maisonettes, for 35 years and our mortgages are paid up. However, our father, who died 4 years ago, was the freeholder. Our mother has therefore now become the freeholder. We don’t want to have a separate freeholder and want to own the freehold ourselves. Our mother is in agreement. Can you advise what would be the best option eg ‘Tenants in Common’ etc?

    Comment by Joanna — June 24, 2014 @ 5:26 pm

  40. Cannot find anywhere information on buying a freehold propery that has holiday statas and what this means. Thanks

    Comment by Mr Humphrey — June 3, 2014 @ 4:13 am

  41. Please can someone guide me. I am about to purchase a ground florr masionette and at the near end of the process we have discovered that the As the lenders consent was not obtained to the Deed of Variation. We will require seller to obtain the necessary consent from the Lender registered against the freehold title and have the entry removed from their title.

    Is there any solution to this ?

    Thanks in advance.

    Comment by Madhu — May 9, 2014 @ 3:48 pm

  42. My father has just passed away and has left a leasehold ground floor flat in his will to me.
    Does this affect ownership and negotiations of the leasehold.

    Comment by Terry — May 7, 2014 @ 7:31 pm

  43. how do i go about buying half the freehold i live in a converted house and live on the first floor but own half the garden. am i entitled to half the freehold?

    Comment by emma warren — January 15, 2014 @ 7:55 pm

  44. We have owned a leasehold, purpose built, maisonette for over 20 years and have paid for our own buildings insurance. We have recently been informed by an insurance company that the landlord should be paying for a block buildings insurance. Is he legally bound to do this?
    Thank You

    Comment by HANNAH WOODFORD — January 11, 2014 @ 10:37 am

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