If you're purchasing residential or commercial property in the UK, you'll need to know whether the purchase will be freehold or leasehold. You may have heard of these terms before, however what do they actually indicate? This easy guide details whatever you require to learn about freehold vs. leasehold and how each one impacts how you own your residential or commercial property.

Leasehold vs. freehold FAQs

What is freehold?

Buying a residential or commercial property freehold simply implies that you own the structure in addition to the land it stands on. Freehold and leasehold are the two main forms of legally owning residential or commercial property in the UK. Freehold is the normal kind of ownership for homes.

What is leasehold?

A leasehold purchase means that you own the house/flat/relevant building, however you have to lease the land it stands on from the freeholder. The freeholder owns the land. This is the typical type of ownership for flats.

How do I understand if a residential or commercial property is freehold?

To learn if a residential or commercial property is leasehold or freehold you can inspect the Land Registry site. Here, you can browse by postal code and look at a copy of the structure owner's title. The title is a document that verifies whether the residential or commercial property is freehold or leasehold.

If you currently owned the residential or commercial property and were asked to sign a lease agreement during the purchase, then your residential or commercial property is leasehold.

Is freehold much better than leasehold?

Freehold purchases are better than leasehold in regards to overall simplicity and total ownership. Freehold residential or commercial properties tend to cost more in advance to buy than leasehold, however leasehold residential or commercial properties frequently feature additional costs and legal problems or restrictions.

Leaseholder expenses might consist of maintenance fees, annual service fee, building insurance coverage, and ground rent. Restrictions using to leasehold residential or commercial properties may include things like:

- The leaseholder might have to get authorization to do work on the residential or commercial property.

- The freeholder may not permit animals.

- The leaseholder may not be allowed to sublet the residential or commercial property.


Also, the freeholder can choose to sell a residential or commercial property's title while a leaseholder is living in the structure. The new owner could then impose additional charges, such as a boost to any service fee, with little to no notification. Overall, when it concerns freehold vs. leasehold, owning a freehold residential or commercial property is simpler and less limiting than a leasehold.

Are there benefits to owning a leasehold residential or commercial property?

There can be advantages to owning a leasehold residential or commercial property. These might consist of having access to common centers such as a gym or resident lounge within an advancement. A leasehold residential or commercial property within a development may also supply benefits such as concierge services or covered parking.

If work needs to be done on the residential or commercial property, the freeholder is accountable for organizing it. However, the leaseholder will typically need to contribute towards the expense of the works.

What are the benefits of buying a freehold?

The main advantage of buying a freehold is that you own the land your residential or commercial property rests on. You do not have to pay any service charges or ground rent. You likewise don't need to look for authorization to make modifications to the residential or commercial property.

Freehold residential or commercial properties are also simpler to sell. The closer a lease is to expiring, the harder it is to sell a leasehold residential or commercial property. Mortgage rates likewise increase if the lease is under 70 years.

You can extend the lease on a residential or commercial property, but at an expense. Depending on the staying time on the lease, extending can cost tens of countless pounds. However, this is altering - see our update on the Leasehold and Freehold Reform Act at the bottom of this short article.

Is it worth buying the freehold of my home?

It can be worth purchasing the freehold of your residential or commercial property if the lease has damaging terms - such as few staying years, high service charges, etc. However, be advised that purchasing the freehold on a leasehold residential or commercial property is typically a costly and lengthy procedure.

Is a 999 year lease as good as freehold?

Having a 999-year lease is not the like having a freehold, it is just a long leasehold. It has the exact same advantages and downsides as a much shorter lease, with the exception of not having to fret about the lease going out or requiring a renewal.

Having a 999-year leasehold still wouldn't exempt you from paying any required ground lease and service charges to the existing freeholder, for example. The long lease time just eliminates among the primary causes for issue regarding this plan.

Are freehold homes worth more than leasehold?

Leasehold residential or commercial properties do tend to be more affordable than freehold residential or commercial properties of the very same type, due to the fact that of the risks connected to leasing. The primary concern being the number of remaining years on the lease. However, this is simply a basic pattern, not an absolute rule.

Does a freehold mean you own the land?

If you own the freehold, you own the residential or commercial property and the land it bases on. The title for the residential or commercial property will list you as the freeholder. You will have complete ownership over that land until you choose to offer it.

Buying.


Flying freeholds: All your concerns addressed

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What is a service charge? Why do I pay it?

The length of time does a freehold last?

The freehold on a residential or commercial property lasts up until the owner decides to sell it. At the point of sale, the freehold then transfers to the brand-new owner.

For how long does a leasehold last?

Leaseholds last for a set variety of years. Standard leasehold lengths are 90 or 120 years. However, leaseholds can last as long as 999 years.

As the length of the lease reduces, so does the value of the residential or commercial property. Short-lease residential or commercial properties can rapidly drop in worth. For instance, a residential or commercial property with a 60-year lease deserves 10 per cent less than one with a 90-year lease.

What happens when a leasehold goes out?

When a leasehold ends, the ownership of the land and the residential or commercial property reverts to the freeholder. This suggests that the freeholder now owns the residential or commercial property.

It used to be the case that if you have lived in a residential or commercial property for more than two years, you have the right to extend the lease by 90 years. Now, thanks to the Leasehold and Freehold Reform Act, this is no longer a requirement. However, you would need to pay for this extension. Extension fees can cost approximately 20 percent of your residential or commercial property's worth. Again, the just recently signed Reform Act intends to make this more affordable.

Can you turn a leasehold into a freehold?

In specific situations, you can turn a leasehold into a freehold. Leaseholders of flats can purchase the freehold for their residential or commercial property with particular limitations. These include:

- The structure needs to include at least two homes.

- At least 75% of the structure is used for residential purposes.

- At least 75% of the flats are owned by leaseholders who own long leases of a minimum of 21 years.

- A minimum of half of the leaseholders want to purchase a share of the freehold.

- If there are only two flats in the building, both leaseholders should wish to purchase the freehold.


Once a group of leaseholders have bought the freehold, they can set their own ground leas and service charges. However, they are then responsible for maintaining the building.

Can a freeholder refuse to offer the freehold to leaseholders?

Freeholders can not refuse to sell the freehold to leaseholders of flats on the residential or commercial property, if they meet the listed requirements. It is a legal right for leaseholders to have the choice to buy out the freehold if they meet these requirements.

What do leaseholders typically challenge with freeholders?

Common disputes made by leaseholders versus freeholders include the cost of annual service charges. The HomeOwners Alliance says that 26% of all leaseholders in the UK feel that they are being overcharged by their freeholder.

Similarly, 23% of leaseholders grumble that they have an absence of control over how and when significant works are done. 18% experience problems when major works are performed, such as excessive noise or interruption.

Freehold vs. leasehold: which is much better?

The concern of freehold vs. leasehold is not a straightforward one. Buying a freehold residential or commercial property is usually easier and more versatile than a leasehold. However, most flats are leasehold residential or commercial properties.

If you are buying a leasehold, you should check the length of time is left on the lease. The value of a leasehold residential or commercial property is connected to the length of its remaining lease. The longer left on the lease, the better.

It's likewise worth examining just how much the ground rent and service fee are if purchasing a leasehold residential or commercial property. Also, examine whether you get access to any communal facilities or other advantages.

If you actually do not wish to reside in a leasehold residential or commercial property and you get on well with your neighbours, you may desire to consider buying the freehold outright. Remember that you'll need a minimum of half the other leaseholders on board to do this. Buying a share of freehold is the most common method to turn a leasehold into freehold residential or commercial property.

Recent modifications to leaseholds

There's been a major reform of UK leasehold law on the cards for many years. The very first stage of the Leasehold Reforms (and Ground Rent) Bill came into impact at the end of June 2022. The primary heading change then was that ground leas were abolished for new residential or commercial properties. This stays excellent news if you plan to buy a leasehold residential or commercial property to reside in or lease out.

The brand-new law likewise suggests that if you already have a leasehold residential or commercial property, the ground rent can not be increased. Once your existing lease term expires, the new agreement must, by law, charge no ground lease. Additionally, ground rent can no longer be charged on retirement residential or commercial properties.

Update May 2024: Leasehold and Freehold Reform Act ends up being law

On 24th May 2024, the Leasehold and Freehold Reform Act became law. While a few of the provisions initially laid out in the initial costs have actually been dropped, it has actually kept a variety of modifications that will make it easier and less expensive for leaseholders to reside in, rent, or otherwise manage their residential or commercial property. A few of the primary provisions of the brand-new law include:

- Banning brand-new leasehold houses in England and Wales - but not on brand-new flats.

- Making it cheaper and easier to extend your lease or purchase the freehold for existing leaseholders in both houses and flats.

- Increasing the basic lease extension term to 990 years, up from the current 90 years, with ₤ 0 ground lease.

- Removing the requirement for new leaseholders to have actually owned their house or flat for two years before these changes apply to them.

- Making purchasing or offering a leasehold residential or commercial property quicker and easier, with a maximum time and cost for the provision of info to a leaseholder by the freeholder.

- Requiring openness over service charges for leaseholders. I.e.: Freeholders or their management business need to prove and transparently how they charge for all aspects of their service charge costs.

- Replacing buildings insurance coverage commissions with a transparent administration fee for handling agents, proprietors and freeholders.

- Extending access to "redress" plans for leaseholders who feel they have actually been a victim of bad practice.

- Scrapping the anticipation that leaseholders ought to pay the freeholders' legal costs when challenging bad practice.

- Granting freehold homeowners on private and blended tenure estates the exact same rights of redress as leaseholders.

- Building on the legislation in the Building Safety Act 2022, that makes sure freeholders and designers are unable to escape their liabilities to money structure removal work.

- Allowing leaseholders in structures with approximately 50% non-residential floorspace to buy their freehold or take over its management. This is an increase from the current 25% limit.


These legal rights and securities represent a continued effort to make leasehold residential or commercial properties less expensive and complicated to own. This is great news for anybody looking to buy this type of residential or commercial property now or in the coming years. The HomeOwners Alliance has even more extensive information about the main topics of debate for leasehold law modifications, so have a look if you wish to discover out more.

If you need more advice on legal terms and concerns around residential or commercial property purchases, our guides area has everything you need. We have guides on conveyancing, transfer of equity, ground lease and much more. We hope that this freehold vs leasehold guide gives you the right beginning knowledge to assist pick the best residential or commercial property for your requirements.

HomeViews is the only independent review platform for property developments in the UK. Prospective purchasers and occupants use it to make a notified choice on where to live based upon insights from thoroughly confirmed resident evaluations. Part of Rightmove since February 2024, we're working with developers, home builders, operators, housing associations and the Government to provide residents a voice, identify high entertainers and to assist improve standards throughout the industry.