Freehold vs Leasehold: Understanding the Difference

These terms describe the type of ownership you are acquiring and carry significant differences for homeowners.

What is Freehold?

If you purchase a freehold property, you own both the building and the land it stands on outright. Your ownership is not limited by time, and you are responsible for the upkeep of the property and the land.

Freehold is generally considered the most straightforward form of ownership, as there is no landlord or ground rent to pay (although in some cases, there may be service charge payable if a management company is instructed to help maintain the land around your property). Most houses in England are freehold, although there are exceptions.

What is Leasehold?

A leasehold property means you own the right to live in the property for a fixed number of years, decades, or even centuries (leases are commonly granted for 99, 125, or 999 years). The land itself remains owned by the freeholder, namely the owner of the freehold interest in the land..

As a leaseholder, you may be required to pay:

• Ground rent (reforms have phased out new ground rents for residential leases to a peppercorn rent),
• Service charges and maintenance fees for shared spaces such as hallways, gardens, or lifts,
• Contributions to major works like roof repairs or external decoration.

Flats are almost always sold as leasehold because of the shared nature of the building. Some houses were historically sold as leasehold, but this practice has been widely criticised and since 2019 most new-build houses cannot legally be sold on a leasehold basis (with limited exceptions).

Key Differences Between Freehold and Leasehold

The distinction between freehold and leasehold can have long-term implications for property owners.

• Ownership: Freehold gives you permanent ownership of the land and property. Leasehold grants ownership for a fixed term only.
• Costs: Leaseholders may face ongoing costs such as ground rent, service charges, and fees for extending their lease. Freeholders are responsible for the entire cost of maintaining the property.
• Control: Freeholders have complete control over their property (subject to planning laws). Leaseholders may also require permission from the freeholder for alterations.
• Expiry: Leasehold property value reduces as the lease term shortens. Extending a lease can be expensive, particularly if the remaining term is less than 80 years although law reform is expected in this area.

Which is Better?

Buyers often prefer freehold because of the control a freeholder has. However, leasehold is common with flats and may be the only available option in some areas. The “better” choice depends on your circumstances, and, in the case of a lease, its terms and how long is left on it. Different rules apply in Scotland and Northern Ireland, where leasehold ownership is uncommon or has been abolished.

Whether you are considering a freehold or leasehold property, it is essential to understand the implications of each before committing to a purchase. Once we are instructed, the residential property team at Mullis & Peake can explain your rights and responsibilities when it comes to a freehold or leasehold, help you review your title deeds or the terms of a lease, and advise on any matters arising from the same.