What's the difference between freehold and leasehold UK?

Freehold: you own the property and land indefinitely — no ground rent, no landlord, no lease to expire. Leasehold: you own the property for a fixed period (e.g., 99 or 125 years), pay ground rent to the freeholder, and the property returns to them when the lease expires (if not extended).

Not necessarily, but it has drawbacks: ground rent can increase, you need freeholder permission for changes, short leases reduce property value and mortgage options, and lease extension costs money. Flats are almost always leasehold; houses should ideally be freehold.

What happens when a lease runs out UK?

Technically, ownership returns to the freeholder. In practice, you have the right to extend. But extending becomes increasingly expensive as the lease shortens — below 80 years triggers marriage value (extra compensation to freeholder). Never let a lease run very short.

How much does it cost to extend a lease UK?

Varies hugely: £5,000-10,000 for long leases (100+ years), £15,000-40,000+ for 80-99 years, much more below 80 years. Premium is calculated using a formula involving remaining term, property value, and ground rent. The shorter the lease, the more expensive to extend.

Leasehold vs Freehold Explained UK — What's the Difference? | PocketWise

Leasehold vs Freehold Explained UK — What's the Difference?

Understand the difference between leasehold and freehold property in the UK. What you own, the costs, and why it matters when buying a home.

By PocketWise · 24 March 2026 · 5 min read

Before buying property in the UK, understanding leasehold vs freehold is essential. Here’s what you need to know.

The Basics

Freehold

Feature	Details
What you own	Property and the land it sits on
Duration	Forever (indefinitely)
Ground rent	None
Freeholder permission	None needed — you’re the owner
Typical for	Houses

Leasehold

Feature	Details
What you own	Right to occupy for fixed term
Duration	Fixed period (e.g., 99, 125, 999 years)
Ground rent	Annual payment to freeholder
Service charges	For communal areas/building
Freeholder permission	Often needed for alterations
Typical for	Flats (almost always), some houses

What You Actually Own

Freehold Ownership

You Own	You Control
Building	Completely
Land	Completely
Airspace above	Within limits
Ground below	Within limits
Any changes	Your decision

Leasehold Ownership

You Own	You Don’t Own
Right to live there	The land
For the lease term	Beyond lease end
Interior of property	Building structure (often)
Right to extend	The freehold (unless you buy it)

Leasehold Costs

Ground Rent

Type	Details
Peppercorn	Nominal (£0-£10/year)
Fixed	Set amount (e.g., £250/year)
Escalating	Increases over time (problematic)
Review clause	Linked to RPI, house prices, or doubling

Escalating Ground Rent Warning

Year	Doubling Every 10 Years
Year 0	£250
Year 10	£500
Year 20	£1,000
Year 30	£2,000
Year 50	£8,000

This can make properties unmortgageable.

Service Charges

What It Covers	Typical Cost
Building insurance	Included
Communal cleaning	Included
Lift maintenance	If applicable
External repairs	Included
Reserve/sinking fund	Building fund
Management fees	Included
Total	£1,000-5,000+/year

Major Works

Issue	Responsibility
Roof replacement	All leaseholders share cost
External decoration	Shared
Lift replacement	Shared
Can cost	Thousands per flat
Section 20 notice	Must be consulted over £250

Lease Length Matters

How Lease Length Affects Value

Lease Length	Impact
90+ years	Most lenders accept
80-90 years	Some lender restrictions
70-80 years	Limited mortgage options
Below 70 years	Very difficult to mortgage
Below 60 years	Severely reduced value

Why 80 Years Is Critical

Above 80 Years	Below 80 Years
Extension premium only	Premium + marriage value
“Marriage value”	50% of increased value to freeholder
Much cheaper	Much more expensive
Easier to extend	Complicated negotiations

Marriage Value Explained

Concept	Details
What it is	Value gain from extending
Below 80 years	Freeholder gets 50%
Example	Flat worth £250k short lease, £300k long = £50k gain
Freeholder gets	£25k of that gain

Lease Extensions

Your Right to Extend

Requirement	Details
Ownership	2+ years
Type	Qualifying lease
Extension amount	Additional 90 years
New ground rent	Peppercorn (effectively nothing)

Estimated Extension Costs

Current Lease	Flat Value £250k	Flat Value £400k
95 years	£5,000-10,000	£8,000-15,000
85 years	£10,000-20,000	£15,000-30,000
75 years	£25,000-40,000	£40,000-60,000
65 years	£40,000-70,000	£65,000-110,000

These are estimates — actual costs depend on many factors.

Extension Process

Step	Details
1	Get professional valuation
2	Serve Section 42 notice (formal request)
3	Freeholder responds with counter-offer
4	Negotiate or go to tribunal
5	Pay premium and legal costs
6	New lease granted
Timeline	6-12 months typically

Buying the Freehold

For Houses (Freehold Purchase)

Right	Details
Legislation	Leasehold Reform Act 1967
Requirement	Lease was originally 21+ years
Cost	Based on share of freehold value
Benefit	No more ground rent, lease, service charges

For Flats (Collective Enfranchisement)

Process	Details
How	Group of leaseholders buy freehold together
Requirement	50% of leaseholders must participate
Then	Form company to manage building
Benefit	Control over service charges, ground rent gone
Cost	Share of freehold purchase + legal costs

Red Flags When Buying Leasehold

Warning Signs

Red Flag	Why It’s Bad
Lease under 80 years	Expensive to extend
Doubling ground rent	Can become unaffordable
RPI-linked ground rent	Increases with inflation
High service charges	Check what’s included
No reserve fund	Big bills when repairs needed
Absent freeholder	Hard to get permissions
Onerous break clauses	Unusual restrictions

Questions to Ask

Question	Why
How long is the lease?	Below 80 years is problematic
What’s the ground rent and does it increase?	Future costs
What are service charges?	Annual costs
Is there a reserve fund?	For major works
Any planned major works?	You’ll pay
How responsive is the freeholder/manager?	Day-to-day experience

Recent Leasehold Reforms

Changes Made/Proposed

Reform	Details
Ground rent cap (new leases)	Peppercorn for new builds (2022+)
Marriage value	Proposed abolition
Standard lease extension	Proposed 990 years
Commonhold	Promoted as alternative
Freeholder costs	Reform proposed

Legislation is ongoing — check current status.

Should You Buy Leasehold?

When Leasehold Is Acceptable

Situation	Notes
Flat (no choice)	Almost all flats are leasehold
Long lease (125+ years)	Plenty of time
Low/peppercorn ground rent	Minimal cost
Well-managed building	Good service
Reasonable service charges	Transparent costs

When to Be Cautious

Situation	Risk
Lease under 85 years	Extension costs
Escalating ground rent	Future problems
High service charges	Ongoing cost
Leasehold house	Usually unnecessary
Unresponsive freeholder	Poor management

Freehold Houses Only?

House Type	Recommendation
Detached/semi/terrace	Expect freehold
If leasehold house offered	Ask why, consider carefully
New build leasehold house	Controversial, best avoided

Summary: Key Differences

Factor	Freehold	Leasehold
What you own	Property + land forever	Right to occupy for term
Ground rent	None	Yes (varies)
Service charge	None	Usually yes
Permission for changes	No	Often yes
Lease to expire	No	Yes — must extend
Building maintenance	Your responsibility	Shared via service charge
Typical property	Houses	Flats

Buying Checklist for Leasehold

Check	Details
Lease length	Ideally 90+ years
Ground rent	Fixed/peppercorn preferred
Ground rent increases	Avoid doubling clauses
Service charges	Get 3+ years’ accounts
Major works planned	Could cost thousands
Freeholder identity	Responsive? Professional?
Lease terms	Any unusual restrictions?

Leasehold isn’t inherently bad, but understanding what you’re buying — and its costs — is essential. For flats, leasehold is standard; for houses, always prefer freehold.

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