When you buy a property, you’re buying a legal interest in it. That interest is called tenure, and it affects what you own, what you’ll pay each year and how easy the property is to sell. This guide covers England and Wales, with a note on Scotland and Northern Ireland.
Key takeaways
- Freehold means you own the building and land outright.
- Leasehold means you own a lease for a fixed term; most flats in England and Wales are leasehold.
- Leases under around 80 years become more expensive to extend and harder to mortgage.
- New leases generally have a peppercorn (zero) ground rent.
- The Leasehold and Freehold Reform Act 2024 is being implemented in stages.
Freehold
With freehold, you own the property and the land it stands on, with no time limit. You’re responsible for maintaining the whole building and don’t pay ground rent or service charges to a landlord.
Most houses in England and Wales are freehold. However, some freehold homes on newer estates pay an estate rent charge or management fee for communal areas such as roads and green spaces. Check for these before you buy.
Leasehold
With leasehold, you own a lease that gives you the right to occupy the property for a set number of years — often 99, 125 or 999 years when first granted. The freeholder (or landlord) owns the building and the land.
Most flats in England and Wales are leasehold, and some houses are too. The lease sets out your rights and obligations, such as:
- Paying ground rent and service charges
- What alterations you can make
- Whether you can sublet or keep pets
- Who is responsible for repairs to different parts of the building
Ground rent
Ground rent is an annual payment to the freeholder. Under the Leasehold Reform (Ground Rent) Act 2022, most new residential long leases in England and Wales granted from 30 June 2022 can only charge a peppercorn — effectively zero.
Older leases can still have ground rent. Watch out for clauses where it doubles every few years, as these can make a property hard to sell or mortgage.
Service charges
A service charge covers the cost of maintaining and insuring the building and shared areas, such as cleaning, lifts, lighting and repairs. It’s usually billed annually or half-yearly and can rise. Many buildings also collect money for a reserve (sinking) fund for major works.
Before buying, ask for at least three years of service charge accounts and details of any planned major works.
Why lease length matters
A lease is a wasting asset — every year, it gets shorter. Once a lease falls below about 80 years, several problems can arise.
Marriage value
Under the current rules, when a lease has less than 80 years left, the cost of extending it includes marriage value — a share of the increase in value the extension creates. This can make the extension much more expensive. The 2024 reform act is set to remove marriage value once the relevant parts are in force.
Mortgageability
Many lenders want the lease to have a certain number of years left at the end of the mortgage term — often 70 years or more, though criteria vary. Short leases can limit the pool of buyers to cash purchasers.
Cost to extend
The shorter the lease, the higher the premium you’ll typically pay to extend it. Costs also include valuation and legal fees for both sides.
Extending a lease
Most flat owners with a long lease have a statutory right to extend it. Leaseholders used to have to own the flat for two years first, but this requirement has been removed under the 2024 reforms. Under the existing formula, a statutory extension typically adds 90 years to the remaining term at a peppercorn ground rent. You can also negotiate informally with the freeholder, but check the terms carefully.
You may also be able to buy the freehold of your building collectively with other leaseholders (collective enfranchisement), or buy the freehold of a leasehold house.
Share of freehold
With share of freehold, leaseholders in a building jointly own the freehold, usually through a company. Each flat still has a lease, but the owners control the building’s management and can grant themselves lease extensions more easily and cheaply.
Shared ownership of the freehold means shared decisions, so check how the company is run and whether the accounts are up to date.
Commonhold
Commonhold is a form of freehold ownership for flats. Each owner owns their unit outright, with no time limit, and becomes a member of a commonhold association that owns and manages the common parts.
Commonhold was introduced in 2002 but has rarely been used. The government has said it wants commonhold to become the default for new flats in future. Check GOV.UK for progress.
Leasehold and Freehold Reform Act 2024
The Leasehold and Freehold Reform Act 2024 makes significant changes to leasehold in England and Wales. It is being implemented in stages, so not all measures are in force yet. Key measures include:
- Increasing the standard lease extension term to 990 years
- Removing the two-year ownership requirement before you can extend or buy the freehold (one of the first measures brought into force)
- Removing marriage value from lease extension calculations
- Banning the sale of most new leasehold houses
- More transparency on service charges and building insurance commissions
- Rights for freehold homeowners on managed estates to challenge estate charges
Check GOV.UK for which parts apply now before relying on them.
Scotland and Northern Ireland
Scotland
Residential leasehold has effectively been abolished in Scotland. Most homes, including flats, are owned outright. Shared parts of tenement buildings are owned and maintained jointly, often through a property factor. See our guide to buying in Scotland.
Northern Ireland
Northern Ireland has both freehold and leasehold, but many leases are very long and ground rents are often small. Owners can usually buy out a ground rent. Take legal advice on any specific lease.
Questions to ask before buying a leasehold property
- How many years are left on the lease?
- What is the ground rent, and does it increase?
- What are the service charges, and what do they cover?
- Is there a reserve fund? Any major works planned?
- Who is the freeholder or managing agent?
- Are there restrictions on letting, pets or alterations?
Your conveyancer should answer these, and they should also appear in the material information on the listing. Factor ongoing charges into your budget with our cost of buying calculator.
This guide is general information, not legal or financial advice. Rules change — check GOV.UK or speak to a qualified professional.