Leasehold vs freehold: what’s the difference?
Freehold means you own the property and the land it stands on outright, with no time limit. Leasehold means you own the property for a fixed number of years while someone else, the freeholder, owns the land and the building. In short, freehold is full ownership, and leasehold is long-term ownership with a landlord in the background and a clock ticking.
This is the question behind almost every leasehold worry, so it is worth understanding clearly. Here is what each one actually means for your money, your control, and selling up, plus the middle options that sit between the two.
What is freehold?
If you own the freehold, you own the building and the land it sits on, with no end date. There is no landlord above you, no ground rent, and no lease to run down. You are responsible for maintaining your own property, but you answer to no one for it. Most houses in England and Wales are sold freehold, which is why house buyers rarely have to think about any of this.
What is leasehold?
If you own a leasehold property, you own it for the length of the lease, often 99, 125 or 999 years, while the freeholder owns the land and the structure. You hold a lease, a long contract that sets out what you pay and what you can do, you may pay ground rent and you will usually pay a service charge towards the building, and the value of what you own slowly falls as the lease shortens. Most flats are leasehold, because a shared building needs someone responsible for the shared parts. Our leasehold explained guide covers how it all works.
Leasehold and freehold compared
| Freehold | Leasehold | |
|---|---|---|
| Ownership | Outright, no time limit | For the length of the lease |
| The land | You own it | The freeholder owns it |
| Ground rent | None | Possible, on older leases |
| Service charge | Usually none | Usually payable |
| Maintaining the building | Your responsibility | Usually the freeholder’s, paid via service charge |
| Value over time | Not affected by a lease | Falls as the lease shortens |
| Permissions needed | Generally none | Often, e.g. to alter or sublet |
Which is better?
For a house, freehold is almost always preferable, and the sale of new leasehold houses is being banned for that reason. For a flat, the picture is more nuanced, because a building of flats needs shared management, so pure individual freehold rarely fits. The honest answer is that freehold gives more control and no ongoing landlord, while leasehold is the normal and workable way to own a flat, as long as you go in understanding the lease length, the charges and your rights. A long lease with low charges and no escalating ground rent is a perfectly good thing to own.
The middle options: share of freehold and commonhold
It is not a strict either-or. With a flat you might have a share of freehold, where the leaseholders jointly own the freehold of the building through a company while still each holding a lease. This gives you collective control and usually long leases with no ground rent, which is why it is often seen as the best of both worlds. There is also commonhold, a form of ownership where flat owners own their flat outright and jointly run the building with no landlord at all. Commonhold is rare today, but the government plans to make it the default for new flats in future as part of leasehold reform.
Can you change from leasehold to freehold?
Often, yes. Leaseholders of a block of flats can club together to buy the freehold, through collective enfranchisement, which turns the building into a share of freehold arrangement. Leaseholders of houses have their own right to buy the freehold. And if buying the freehold is not realistic, you can usually extend your lease instead, which removes the ground rent and pushes the lease length out so far that the difference from freehold becomes academic for most purposes.
Frequently asked questions
Is a leasehold flat a bad investment?
Not inherently. A flat with a long lease, reasonable charges and no escalating ground rent is a normal and sensible thing to own. Problems come from short leases and unfair charges, both of which you can check for before buying and, in many cases, fix.
Why are flats leasehold but houses usually freehold?
Because a block of flats has shared structure and common parts that someone has to maintain and insure, leasehold has traditionally provided the framework for that. A house stands on its own, so it does not need the same shared arrangement, which is why houses are normally freehold.
Is share of freehold the same as freehold?
Not quite. With share of freehold you jointly own the building’s freehold with the other flat owners while still holding a lease of your own flat. It gives you collective control and the ability to grant long leases at no ground rent, which is why it is often preferred, but it still involves a lease and shared decision-making.
This guide provides general information about leasehold and freehold ownership in England and Wales. It is not legal advice. For advice on your own situation, consult a qualified solicitor or a specialist such as the Leasehold Advisory Service (LEASE). Last reviewed [date]; reviewed whenever the law changes.