Freehold Versus Leasehold

May, 2022

Wondering what the difference is between a leasehold and a freehold? They are both types of ownership, but’s it’s important to understand the difference and how it affects buying, owning and selling your home.  

What is a freehold?

The freeholder owns the property and the land it is built on.

If you buy a freehold, you’re responsible for the maintenance and upkeep of your property including the land.

Most houses nowadays are freehold, but some are leasehold.

Benefits of having a freehold 

  • you own the property outright
  • no ground rent or service changes to pay

Owning a share of freehold

If your property is leasehold, you can buy the freehold from the freeholder if at least half of the leaseholders agree to buy a share. 

Doing this gives you more control over your home and the costs you pay out.

If you are buying the freehold for a block of flats with various leaseholders, you and the other leaseholders will also need to set up a company to manage the building or find a managing agent to do it for you.

What is a leasehold?

As a leaseholder, you own the property (subject to the terms within the lease) for the length of your lease agreement with the freeholder. 

When the lease ends, ownership returns to the freeholder, unless you can extend the lease.

Most flats and maisonettes are owned leasehold, so while you own your property in the building, you don’t have a stake in the building it is in.

Houses that are leasehold, you own the property, but not the land it sits on.

Buying a leasehold

When you buy a leasehold property, you’ll take over the lease from the previous owner.

Questions you will need answering are:

  • how many years are left on the lease?
  • Will this affect me getting a mortgage

Most banks will not give you a mortgage on a leasehold property if the lease is less than 80 years. The value of the property is affected by the diminishing term of the lease which could make the property more difficult to sell.

Extending the lease

You have the option to extend the lease by at least 90 years, providing you have owned the property for two years or more and the original lease was for more than 21 years. The freeholder will charge for extending the lease and this cost will depend on the property.

If you and the freeholder can’t agree on the cost of extending the lease, you can appeal to the Leasehold Valuation Tribunal.

Charges for leasehold properties

If you own a leasehold property, you don’t own the land. This means the freeholder is responsible for the maintenance and repair of the building.

The leaseholders are usually charged a service fee to the freeholder.

Service charges cover things such as:

  • maintaining communal gardens
  • electricity bills for communal areas
  • repair and maintenance of exterior walls

Other charges might include:

  • ground rent
  • administration charges
  • buildings insurance (arranged by the landlord).

Your rights as a leaseholder

As a leaseholder you have rights preventing the landlord from taking advantage of you financially.

For example, you can ask to see:

  • a summary of what the service charges are being spent on
  • how they’ve been calculated
  • any supporting paperwork, such as receipts for work done.

The freeholder must also consult you:

  • about any building work costing more than £250
  • before doing any work lasting more than a year
  • before doing any work costing you over £100 a year.

Commonhold properties

Commonhold is a method of ownership of the freehold in a building or an estate.

A freehold estate is divided into “units” and “common parts”. The units are typically a flat and owned by a “unit holder” and the common parts, which may include stairways, lifts and outdoor spaces, are owned by a “commonhold association”.

A commonhold association owns the remainder of the building or estate and is managed by the unit holders Instead of owning property as a leasehold for a fixed period of time, with commonhold you own your property as a freehold indefinitely.


Are you thinking of selling?

HS Homes of Solihull is a small independent estate agent based in Shirley, Solihull. If you are interested to know what your home is worth, call us on 0121 430 4448. Alternatively, click here to book a free market appraisal.



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