Guide · 4 minute read · Updated 10 Jul 2026

Leasehold vs freehold: what's the difference?

Freehold means you own the building and the land it sits on outright, with no time limit. Leasehold means you own the property for a fixed number of years under a lease, with a landlord who owns the freehold underneath you. The difference shapes your bills, your control and, if the lease runs short, the value of the home.

What each one means

If you own the freehold, the property and its land are yours indefinitely. You maintain it, you make the decisions, and there is no landlord and no ground rent. Most houses in England and Wales are freehold.

Leasehold is ownership on a clock. You own the right to live in the property for the term of the lease, often originally 99, 125 or 999 years, but the freeholder owns the land and, in a block of flats, the structure and common parts. Most flats are leasehold, because someone has to be responsible for the shared roof, hallways and grounds. When the lease runs out, ownership reverts to the freeholder, which is why the number of years left matters so much.

The costs a leaseholder pays

Leasehold comes with charges a freeholder never sees. Ground rent is a payment to the freeholder for the land. Under the Leasehold Reform (Ground Rent) Act 2022, most new residential leases must set ground rent at a peppercorn, meaning effectively zero, but leases granted before that can still carry real ground rents, sometimes ones that double every few years, which lenders dislike.

Then there is the service charge, which covers maintenance, buildings insurance and often a sinking fund for big future works. It varies widely, from a few hundred pounds a year on a small block to several thousand where there are lifts, concierge or major repairs. You may also pay an administration charge for permission to alter the flat or sublet it. None of these are optional, and they can rise, so ask for the last few years of service charge accounts before you buy.

The sub-80-year trap

The single biggest leasehold pitfall is a short lease. As a lease falls below about 80 years it becomes markedly more expensive to extend, historically because of an extra cost called marriage value, and it also gets harder to mortgage, since many lenders want a good margin of years left at the end of their loan. A lease of 82 years today is on the wrong side of that line sooner than owners expect.

You generally have a legal right to extend your lease or, with other leaseholders, to buy the freehold. The Leasehold and Freehold Reform Act 2024 legislated to abolish marriage value and make extensions cheaper and simpler, but as of 2026 those provisions were not yet fully in force, with commencement expected later. The practical rule stands: never let a lease drift toward 80 years, and treat anything already close to it as a price you need to negotiate down.

Which should you choose

Given a free choice, freehold is simpler: no landlord, no ground rent, no service charge you cannot control. For a flat, leasehold is usually unavoidable, so the real questions are how long the lease is, how reasonable the service charge and ground rent are, and how well the building is managed. A long lease, a modest and well-accounted service charge, and a peppercorn ground rent make leasehold perfectly livable. A short lease or an escalating ground rent should either drop the price or send you elsewhere. Weigh the running costs against renting the same place with the rent vs buy calculator.

Common questions

What is the difference between leasehold and freehold?

Freehold means you own the property and its land outright, with no time limit, no ground rent and no landlord. Leasehold means you own it for a fixed term under a lease while a freeholder owns the land beneath, and you pay ground rent and service charges. Most houses are freehold; most flats are leasehold.

Why is a lease under 80 years a problem?

Below about 80 years remaining, extending the lease becomes markedly more expensive, historically because of an added cost called marriage value, and the flat gets harder to mortgage. The 2024 reforms legislated to abolish marriage value, but as of 2026 that was not yet fully in force, so a short lease still needs treating with care.

Do I have to pay ground rent on a leasehold flat?

It depends on when the lease was granted. Most new residential leases since June 2022 must set ground rent at a peppercorn, effectively zero. Older leases can still charge real ground rent, sometimes rising over time, which lenders dislike, so check the exact ground rent terms before buying.

Can I extend my lease or buy the freehold?

Usually yes. Leaseholders generally have a legal right to extend the lease, and flat owners can often join together to buy the freehold. It costs a premium plus legal and valuation fees, and it is cheaper the longer the lease still has to run, which is why acting well before 80 years remain matters.

Guidance and education, not regulated financial advice.