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

Leasehold vs. freehold FAQs

What is freehold?

Buying a residential or commercial property freehold merely indicates that you own the structure along with the land it bases on. Freehold and leasehold are the two main kinds of lawfully owning residential or commercial property in the UK. Freehold is the normal form of ownership for houses.

What is leasehold?

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

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

To discover if a residential or commercial property is leasehold or freehold you can examine the Land Registry site. Here, you can browse by postcode and take a look at a copy of the structure owner's title. The title is a file that validates whether the residential or commercial property is freehold or leasehold.

If you already owned the residential or commercial property and were asked to sign a lease arrangement throughout the purchase, then your residential or commercial property is leasehold.

Is freehold 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 upfront to purchase than leasehold, however leasehold residential or commercial properties frequently come with extra expenses and legal issues or constraints.

Leaseholder costs may consist of upkeep charges, yearly service fee, developing insurance, and ground lease. Restrictions applying to leasehold residential or commercial properties might consist of things like:

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

- The freeholder may not enable family pets.

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


Also, the freeholder can pick to sell a residential or commercial property's title while a leaseholder is residing in the building. The new owner could then impose added fees, such as an increase to any service charge, with little to no notification. Overall, when it pertains to freehold vs. leasehold, owning a freehold residential or commercial property is simpler and less restrictive than a leasehold.

Exist advantages to owning a leasehold residential or commercial property?

There can be benefits to owning a leasehold residential or commercial property. These might include having access to communal facilities such as a fitness center or resident lounge within an advancement. A leasehold residential or commercial property within a development may likewise provide advantages such as concierge services or covered parking.

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

What are the benefits of purchasing a freehold?

The primary benefit of purchasing a freehold is that you own the land your residential or commercial property sits on. You don't need to pay any added fees or ground rent. You likewise don't have to look for authorization to make changes to the residential or commercial property.

Freehold residential or commercial properties are also simpler to offer. 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 a cost. Depending on the staying time on the lease, extending can cost tens of thousands of pounds. However, this is changing - see our upgrade on the Leasehold and Freehold Reform Act at the bottom of this post.

Is it worth buying the freehold of my house?

It can be worth purchasing the freehold of your residential or commercial property if the lease has damaging terms - such as few remaining years, high service fee, etc. However, be recommended that purchasing the freehold on a leasehold residential or commercial property is typically a costly and time-consuming process.

Is a 999 year lease as good as freehold?

Having a 999-year lease is not the exact same as having a freehold, it is simply an extremely long leasehold. It has the same benefits and downsides as a much shorter lease, with the exception of not needing to stress over the lease running out or needing a renewal.

Having a 999-year leasehold still would not excuse you from paying any needed ground lease and service fee to the existing freeholder, for instance. The long lease time simply removes among the primary causes for concern regarding this arrangement.

Are freehold houses worth more than leasehold?

Leasehold residential or commercial properties do tend to be cheaper than freehold residential or commercial properties of the same type, because of the threats attached to leasing. The main issue being the number of remaining years on the lease. However, this is simply a basic pattern, not an absolute guideline.

Does a freehold mean you own the land?

If you own the freehold, you own the residential or commercial property and the land it stands on. The title for the residential or commercial property will note you as the freeholder. You will have complete ownership over that land until you select to sell it.

Buying.


Flying freeholds: All your questions answered

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

For how long does a freehold last?

The freehold on a residential or commercial property lasts till the owner chooses to offer it. At the point of sale, the freehold then moves to the new owner.

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 quickly drop in worth. For example, a residential or commercial property with a 60-year lease is worth 10 per cent less than one with a 90-year lease.

What occurs when a leasehold goes out?

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

It utilized 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 spend for this extension. Extension costs can cost up to 20 per cent of your residential or commercial property's worth. Again, the just recently signed Reform Act intends to make this less expensive.

Can you turn a leasehold into a freehold?

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

- The building needs to consist of at least two apartment or condos.

- A minimum of 75% of the structure is used for domestic functions.

- 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 wish to buy a share of the freehold.

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


Once a group of leaseholders have acquired the freehold, they can set their own ground leas and service fee. However, they are then responsible for keeping the structure.

Can a freeholder refuse to offer the freehold to leaseholders?

Freeholders can not decline 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 purchase out the freehold if they satisfy these criteria.

What do leaseholders commonly contest with freeholders?

Common disagreements made by leaseholders versus freeholders involve the cost of annual service charges. The HomeOwners Alliance states 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 major works are done. 18% experience issues when significant works are performed, such as extreme sound or disruption.

Freehold vs. leasehold: which is better?

The question of freehold vs. leasehold is not a straightforward one. Buying a freehold residential or commercial property is normally simpler and more flexible than a leasehold. However, most flats are leasehold residential or commercial properties.

If you are buying a leasehold, you must inspect 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 staying lease. The longer left on the lease, the much better.

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

If you actually don't wish to reside in a leasehold residential or commercial property and you get on well with your neighbours, you may wish 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 typical method to turn a leasehold into freehold residential or commercial property.

Recent modifications to leaseholds

There's been a significant reform of UK leasehold law on the cards for several years. The first phase of the Leasehold Reforms (and Ground Rent) Bill entered into impact at the end of June 2022. The main heading change then was that ground rents were eliminated for brand-new residential or commercial properties. This remains excellent news if you mean to purchase a leasehold residential or commercial property to live in or rent.

The brand-new law also suggests that if you already have a leasehold residential or commercial property, the ground rent can not be increased. Once your existing lease term ends, the new arrangement must, by law, charge zero ground rent. 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 ended up being law. While a few of the provisions initially described in the initial bill have actually been dropped, it has kept a variety of modifications that will make it much easier and cheaper for leaseholders to reside in, lease, or otherwise manage their residential or commercial property. A few of the primary arrangements of the new law include:

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

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

- Increasing the standard lease extension term to 990 years, up from the existing 90 years, with ₤ 0 ground rent.

- Removing the requirement for new leaseholders to have actually owned their house or flat for 2 years before these modifications apply to them.

- Making purchasing or selling a leasehold residential or commercial property quicker and simpler, with a maximum time and fee for the provision of information to a leaseholder by the freeholder.

- Requiring transparency 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 fee fees.

- Replacing buildings insurance coverage commissions with a transparent administration fee for handling representatives, property managers and freeholders.

- Extending access to "redress" schemes for leaseholders who feel they've been a victim of bad practice.

- Scrapping the anticipation that leaseholders must pay the freeholders' legal expenses when challenging poor practice.

- Granting freehold property owners on personal and combined period estates the very same rights of redress as leaseholders.

- Building on the legislation in the Building Safety Act 2022, that guarantees freeholders and designers are not able to leave their liabilities to money structure remediation work.

- Allowing leaseholders in buildings with up to 50% non-residential floorspace to purchase their freehold or take control of its management. This is a boost from the current 25% threshold.


These legal rights and securities represent an ongoing effort to make leasehold residential or commercial properties less expensive and complex to own. This is excellent news for anyone seeking to buy this sort of residential or commercial property now or in the coming years. The HomeOwners Alliance has even more thorough information about the main topics of debate for leasehold law changes, so take a look if you wish to learn more.

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

HomeViews is the only independent review platform for property advancements in the UK. Prospective purchasers and renters use it to make a notified decision on where to live based upon insights from thoroughly confirmed resident evaluations. Part of Rightmove given that February 2024, we're dealing with developers, house home builders, operators, housing associations and the Government to provide homeowners a voice, recognise high entertainers and to help enhance standards across the industry.