If you’re buying a property in the UK, you’ll encounter the terms leasehold and freehold. Understanding the difference is essential, as it has significant implications for your rights as an owner and the ongoing costs of ownership.
When you buy a freehold property, you own the building and the land it stands on outright. There are no ground rent payments, no service charges and no lease to worry about. Freehold is the simpler and generally more desirable form of ownership, and the vast majority of houses in England and Wales are sold freehold.
A leasehold property means you own the property for a fixed period — the length of the lease — but not the land it sits on. The land is owned by a freeholder (also called a landlord), to whom you may owe ground rent and service charges. Flats are almost always sold leasehold, as the shared nature of the building makes freehold ownership more complex.
The length of the lease matters enormously. A lease with over 90 years remaining is generally considered healthy. When a lease falls below 80 years, it becomes significantly harder and more expensive to extend, and mortgage lenders may refuse to lend on the property. Always check the lease length before making an offer.
Service charges cover the cost of maintaining shared areas and the structure of the building. These can vary significantly and are worth scrutinising carefully. Ask for several years of accounts to understand what’s been spent and whether there are any major works planned.
Ground rent has historically been a source of controversy, with some developers including escalating ground rent clauses that can make properties difficult to sell or mortgage. Always have your solicitor review the ground rent terms carefully before exchanging contracts.
