Most flats are leasehold and most houses are freehold, but the two types of ownership work very differently. Here is what each one means for your costs, your mortgage and your rights.
Summary
- Freehold means owning the building and the land outright, with no time limit; leasehold means holding the right to occupy a property for a fixed number of years.
- Leaseholders usually pay ground rent and service charges on top of their mortgage, and the lease may allow ground rent to rise over time.
- Lenders often require a minimum number of years left on a lease, so short leases can limit both mortgage options and resale value.
- The Leasehold and Freehold Reform Act 2024 is law but its provisions are taking effect in stages, including changes to lease extensions and a planned cap on ground rent.
- Always read the lease terms and ask about ground rent, service charges and years remaining before making an offer.
Tenure sits in the small print of a property listing, yet it shapes what you own, what you pay each year and how easily the home will sell. In England and Wales, the typical house is sold freehold, while flats are usually leasehold. Knowing which applies before you make an offer can spare you unexpected bills and mortgage trouble.
What Freehold and Leasehold Mean
If you buy a freehold home, you own the building and the land it stands on, with no time limit. There is no ground rent and no maintenance fee owed to a landlord, though you carry the full cost of maintaining the property and land yourself. With a leasehold, you buy the right to occupy the property for a fixed term while the land stays with the freeholder. When the term expires, the property passes back to them.
What a Lease Lets You Do
A lease is a binding legal contract. It records how many years remain and sets out the rights and duties of the person living there. Those duties usually include paying ground rent and service charges, and many leases add rules such as a ban on pets or limits on letting the property out.
Leaseholders generally need the freeholder’s consent for alterations and renovations, while freeholders have more control, with planning permission and any covenants still applying. Leasehold houses have become more common, particularly among new builds sold directly by developers, and every shared ownership home is leasehold, whether a house or a flat.
Ground Rent and Service Charges
Ground rent is money paid to the freeholder, typically once a year. The lease sets out the current rate and whether it will rise. A fixed rate holds steady for the whole term, while an escalating rate can double at set intervals, in some cases every five years. In a survey of more than 1,000 people who bought a leasehold house, almost half did not know their ground rent could rise when they bought.
Service charges cover the cost of looking after the building and its surroundings. They typically fund the upkeep of shared spaces, building insurance and management fees, and they differ a lot from one development to the next. Your lease lists the items that apply to your home, which might include a lift or communal gardens, or neither. Freehold homes normally carry no such charges, though some have estate charges for shared facilities.
Why Lease Length Matters
The years remaining are a key consideration when assessing a leasehold. Many lenders set a minimum lease length before they will consider a mortgage, and the threshold differs between lenders. As a lease shortens, the property’s value can fall. Below certain levels, extending it costs more and mortgage options narrow, which affects both your purchase and any later sale.
A lease only ever gets shorter, so treat the years remaining as part of the price. You can extend a lease if you qualify, but it carries legal fees and other costs worth weighing before you commit.
Your Rights as a Leaseholder, and Where Commonhold Fits
The Leasehold and Freehold Reform Act 2024 has passed, though its separate provisions are taking effect in stages rather than all at once. Since January 2025, flat owners no longer need to wait two years after buying before extending their lease. The Act also widens access to the right to manage for leaseholders in buildings used partly for business.
The government has announced that ground rent will be capped at £250 a year, and that after 40 years it will drop to a peppercorn, meaning nothing is paid. The cap is expected to cover most residential leases signed before July 2023. Forfeiture, the rule under which a leaseholder could lose their home over unpaid fees as low as £350, is being abolished in favour of a fairer system.
New flats will eventually have to be sold as commonhold rather than leasehold, apart from a narrow set of exceptions. Under commonhold, you own your flat outright and share ownership and management of the building with your neighbours. Existing leaseholders are expected to get an easier path to convert. The Leasehold Advisory Service offers free, independent advice on leasehold questions.
Freehold and Leasehold Side by Side
| Feature | Freehold | Leasehold |
|---|---|---|
| What you own | The building and the land, with no time limit | The right to occupy for the years left on the lease |
| Typical property | Houses | Flats, and some houses including new builds |
| Ongoing costs | None owed to a landlord, though some homes have estate charges | Ground rent, service charges and sometimes separate major repair bills |
| Mortgage and resale | Straightforward tenure for most lenders | Lenders may require a minimum lease period; short leases restrict options |
| Suits | Buyers who want outright ownership and can cover all upkeep costs | Buyers of flats, or those accepting lease terms for a lower initial price and shared amenities |
Before offering on a leasehold home, ask your conveyancer to confirm the years remaining, the current ground rent and whether it can rise, and what the service charge covers. Read the lease for rules on pets, subletting and alterations. The asking price is only part of the cost; our guide to how much buying a home really costs covers the rest.
Top tip
If a lease allows an escalating ground rent, get the terms in writing and ask your solicitor exactly when and by how much it can rise.
Next steps
- How Much Does It Really Cost to Buy a Home?: the costs beyond the deposit, from tax to legal fees.
- Budgeting for UK Household Bills: planning for council tax, energy and other regular costs.
- Credit Reports in the UK: How the Three Agencies Work: understanding your credit file before a mortgage application.
Questions readers ask
Is it better to buy freehold or leasehold?
Neither is universally better. Freehold gives you outright ownership with no ground rent, while leasehold is standard for flats and often carries a lower initial price but extra ongoing costs. The right choice depends on the property type, the lease terms and your budget.
What happens when a lease runs out?
Ownership of the property passes back to the freeholder. In practice, most leaseholders extend their lease long before the term runs out, and there are legal routes to do so.
Can a leasehold be refused for a mortgage?
Yes. Many lenders require a minimum number of years remaining on a lease, and availability can become restricted as the term shortens. Check the years remaining early in the process.
Do leasehold rules apply to houses as well as flats?
Leasehold applies mostly to flats, but leasehold houses have become more common, particularly among new builds sold directly by developers. Always check the tenure before offering, whatever the property type.
This guide is general information, not financial advice. Rules, rates and allowances can change, so check the latest details with the provider, GOV.UK or the Financial Conduct Authority before making decisions. For advice on your own circumstances, speak to an FCA-authorised financial adviser.