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 become aware of these terms before, but what do they really indicate? This basic guide lays out whatever you require to know 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 merely suggests that you own the structure in addition to the land it bases on. Freehold and leasehold are the two main types of lawfully owning residential or commercial property in the UK. Freehold is the regular form of ownership for homes.

What is leasehold?

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

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

To discover out if a residential or commercial property is leasehold or freehold you can examine the Land Registry website. Here, you can search by postal code and take a look at a copy of the structure owner's title. The title is a file 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 arrangement during the purchase, then your residential or commercial property is leasehold.

Is freehold much better than leasehold?

Freehold purchases are much better than leasehold in terms of general simplicity and complete ownership. Freehold residential or commercial properties tend to cost more in advance to purchase than leasehold, but leasehold residential or commercial properties typically come with additional costs and legal complications or limitations.

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

- The leaseholder may need to get approval to do work on the residential or commercial property.

- The freeholder might not enable animals.

- The leaseholder may 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 living in the structure. The brand-new owner might then levy added fees, such as an increase to any service fee, with little to no notification. Overall, when it comes to 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 may include having access to common facilities such as a fitness center or resident lounge within a development. A leasehold residential or commercial property within a development may likewise provide 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 benefit of buying a freehold is that you own the land your residential or commercial property sits on. You don't have to pay any surcharges or ground rent. You likewise don't need to seek authorization to make modifications to the residential or commercial property.

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

You can extend the lease on a residential or commercial property, however at a cost. Depending on the remaining time on the lease, extending can cost tens of countless 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 home?

It can be worth purchasing the freehold of your residential or commercial property if the lease has unfavourable terms - such as couple of staying years, high service charges, etc. However, be encouraged that purchasing the freehold on a leasehold residential or commercial property is frequently an expensive and time-consuming procedure.

Is a 999 year lease as great as freehold?

Having a 999-year lease is not the like having a freehold, it is simply an extremely long leasehold. It has the exact same advantages and disadvantages as a shorter lease, with the exception of not needing to fret about the lease running out or needing a renewal.

Having a 999-year leasehold still would not excuse you from paying any needed ground rent and service charges to the present freeholder, for example. The long lease time simply removes one of the main causes for issue regarding this arrangement.

Are freehold homes worth more than leasehold?

Leasehold residential or commercial properties do tend to be less expensive than freehold residential or commercial properties of the very same type, because of the dangers connected to leasing. The main concern being the variety of remaining years on the lease. However, this is simply a general trend, not an absolute rule.

Does a freehold indicate 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 note you as the freeholder. You will have total ownership over that land until you select to sell it.

Buying.


Flying freeholds: All your concerns addressed

Buying.


What does Share of Freehold mean?

Buying.


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

The length of time does a freehold last?

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

The length of time does a leasehold last?

Leaseholds last for a set number 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 decreases, so does the value of the residential or commercial property. Short-lease residential or commercial properties can quickly drop in value. 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 occurs when a leasehold runs out?

When a leasehold ends, the ownership of the land and the residential or commercial property reverts to the freeholder. This means 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 2 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 have to pay for this extension. Extension fees can cost approximately 20 percent of your residential or commercial property's value. Again, the just recently signed Reform Act aims to make this cheaper.

Can you turn a leasehold into a freehold?

In particular scenarios, you can turn a leasehold into a freehold. Leaseholders of flats can buy the freehold for their residential or commercial property with particular limitations. These consist of:

- The structure needs to include a minimum of two houses.

- At least 75% of the building is utilized for property purposes.

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

- At least half of the leaseholders want to purchase a share of the freehold.

- If there are just 2 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 charges. However, they are then accountable for maintaining the building.

Can a freeholder refuse to offer the freehold to leaseholders?

Freeholders can not decline to offer the freehold to leaseholders of flats on the residential or commercial property, if they satisfy the listed requirements. It is a legal right for leaseholders to have the alternative to purchase out the freehold if they fulfill these criteria.

What do leaseholders commonly contest with freeholders?

Common disagreements made by leaseholders versus freeholders include the expense of yearly service fee. 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 a lack of control over how and when major works are done. 18% experience issues when major works are performed, such as extreme noise or interruption.

Freehold vs. leasehold: which is much better?

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

If you are buying a leasehold, you should check for how long is left on the lease. The worth 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 also worth inspecting just how much the ground lease and service charges are if buying a leasehold residential or commercial property. Also, check whether you get access to any communal centers or other advantages.

If you truly don't wish to live in a leasehold residential or commercial property and you get on well with your neighbours, you might want to think about purchasing the freehold outright. Bear in mind that you'll require a minimum of half the other leaseholders on board to do this. Buying a share of freehold is the most common way to turn a leasehold into freehold residential or commercial property.

Recent changes to leaseholds

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

The brand-new law also suggests that if you already have a leasehold residential or commercial property, the ground lease can not be increased. Once your existing lease term ends, the new arrangement must, by law, charge zero ground lease. Additionally, ground lease 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 some of the provisions originally detailed in the initial costs have been dropped, it has actually kept a variety of modifications that will make it easier and more affordable for leaseholders to reside in, rent, or otherwise handle their residential or commercial property. A few of the main arrangements of the brand-new law include:

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

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

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

- Removing the requirement for brand-new leaseholders to have owned their home or flat for 2 years before these modifications use to them.

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

- Requiring transparency over service fee for leaseholders. I.e.: Freeholders or their management business need to show clearly and transparently how they charge for all aspects of their service fee fees.

- Replacing structures insurance coverage commissions with a transparent administration charge for managing agents, proprietors and freeholders.

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

- Scrapping the anticipation that leaseholders should pay the freeholders' legal expenses when challenging bad practice.

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

- Building on the legislation in the Building Safety Act 2022, that guarantees freeholders and developers are unable to leave their liabilities to money structure remediation work.

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


These legal rights and securities represent a continued effort to make leasehold residential or commercial properties less costly and complicated to own. This is excellent news for anyone looking to buy this kind of residential or commercial property now or in the coming years. The HomeOwners Alliance has further extensive details about the primary topics of argument for leasehold law modifications, so take an appearance if you desire to learn more.

If you need more advice 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 gives you the best starting knowledge to help choose the best residential or commercial property for your needs.

HomeViews is the only independent evaluation platform for residential developments in the UK. Prospective buyers and occupants utilize it to make an informed decision on where to live based upon insights from carefully verified resident evaluations. Part of Rightmove because February 2024, we're dealing with designers, home contractors, operators, housing associations and the Government to offer homeowners a voice, identify high performers and to assist improve requirements throughout the industry.