If you're buying residential or commercial property in the UK, you'll require to understand whether the purchase will be freehold or leasehold. You may have heard of these terms before, however what do they in fact imply? This simple guide outlines whatever you need to understand about freehold vs. leasehold and how each one affects how you own your residential or commercial property.

Leasehold vs. freehold FAQs

What is freehold?

Buying a residential or commercial property freehold merely means that you own the structure along with the land it stands on. Freehold and leasehold are the two main kinds of legally owning residential or commercial property in the UK. Freehold is the normal kind of ownership for homes.

What is leasehold?

A leasehold purchase implies that you own the house/flat/relevant structure, but you need to lease the land it stands on from the freeholder. The freeholder owns the land. This is the typical kind of ownership for flats.

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

To learn if a residential or commercial property is leasehold or freehold you can check the Land Registry site. Here, you can search by postcode and take a look at a copy of the building owner's title. The title is a file that validates 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 contract throughout the purchase, then your residential or commercial property is leasehold.

Is freehold much better than leasehold?

Freehold purchases are better than leasehold in terms of overall simplicity and total ownership. Freehold residential or commercial properties tend to cost more upfront to buy than leasehold, however leasehold residential or commercial properties often include additional expenses and legal complications or limitations.

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

- The leaseholder may have to get consent to do deal with the residential or commercial property.

- The freeholder may not enable animals.

- The leaseholder may not be enabled 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 building. The brand-new owner might then levy added fees, such as a boost to any service charge, with little to no notice. Overall, when it pertains to freehold vs. leasehold, owning a freehold residential or commercial property is easier 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 communal centers such as a fitness center or resident lounge within a development. A leasehold residential or commercial property within a development may also offer benefits 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 often have to contribute towards the expense of the works.

What are the advantages of purchasing a freehold?

The primary advantage of purchasing a freehold is that you own the land your residential or commercial property rests on. You don't need to pay any surcharges or ground rent. You likewise do not need to look for permission to make modifications to the residential or commercial property.

Freehold residential or commercial properties are also easier to sell. The closer a lease is to expiring, the more difficult it is to sell 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, but at an expense. Depending upon the staying 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 damaging terms - such as few staying years, high service charges, etc. However, be advised that purchasing the freehold on a leasehold residential or commercial property is frequently a pricey and lengthy 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 a very long leasehold. It has the very same benefits and disadvantages as a much shorter lease, with the exception of not having to worry about the lease going out or needing a renewal.

Having a 999-year leasehold still would not exempt you from paying any essential ground lease and service fee to the current freeholder, for instance. The long lease time just eliminates among the primary causes for concern regarding this plan.

Are freehold homes worth more than leasehold?

Leasehold residential or commercial properties do tend to be more affordable than freehold residential or commercial properties of the very same type, since of the risks connected to leasing. The main issue being the variety of remaining years on the lease. However, this is simply a general pattern, not an outright rule.

Does a freehold imply 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 list you as the freeholder. You will have complete ownership over that land till you select to offer it.

Buying.


Flying freeholds: All your questions responded to

Buying.


What does Share of Freehold imply?

Buying.


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

How long does a freehold last?

The freehold on a residential or commercial property lasts up until the owner decides to offer 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 worth of the residential or commercial property. Short-lease residential or commercial properties can quickly drop in value. For example, a residential or commercial property with a 60-year lease is worth 10 percent less than one with a 90-year lease.

What takes place when a leasehold runs out?

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

It used to be the case that if you have actually resided in a residential or commercial property for more than two years, you deserve 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 charges can cost up to 20 per cent of your residential or commercial property's worth. Again, the recently signed Reform Act intends to make this less expensive.

Can you turn a leasehold into a freehold?

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

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

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

- 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 wish to buy a share of the freehold.

- If there are only 2 flats in the structure, both leaseholders need to wish to buy the freehold.


Once a group of leaseholders have actually acquired the freehold, they can set their own ground rents and service fee. However, they are then responsible for maintaining the building.

Can a freeholder refuse to offer the freehold to leaseholders?

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

What do leaseholders frequently dispute with freeholders?

Common conflicts made by leaseholders versus freeholders include the expense of annual service charges. The HomeOwners Alliance says 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 major works are performed, such as extreme sound or disturbance.

Freehold vs. leasehold: which is better?

The concern of freehold vs. leasehold is not an uncomplicated one. Buying a freehold residential or commercial property is typically 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 how long is left on the lease. The value of a leasehold residential or commercial property is connected to the length of its remaining lease. The longer left on the lease, the much better.

It's likewise worth examining how much the ground lease and service fee are if purchasing a leasehold residential or commercial property. Also, check whether you get access to any common facilities or other advantages.

If you actually do not want to live in a leasehold residential or commercial property and you get on well with your neighbours, you might wish to think about purchasing the freehold outright. Keep in mind that you'll need a minimum of half the other leaseholders on board to do this. Buying a share of freehold is the most common method 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 entered into result at the end of June 2022. The primary headline change then was that ground rents were eliminated for brand-new residential or commercial properties. This remains great news if you plan to buy a leasehold residential or commercial property to reside in or lease out.

The new law likewise indicates that if you currently have a leasehold residential or commercial property, the ground lease can not be increased. Once your existing lease term ends, the new agreement must, by law, charge no ground lease. Additionally, ground rent can no longer be charged on retirement residential or commercial properties.

Update May 2024: Leasehold and Freehold Reform Act becomes law

On 24th May 2024, the Leasehold and Freehold Reform Act ended up being law. While some of the arrangements initially described in the preliminary expense have actually been dropped, it has kept a variety of changes that will make it much easier and cheaper for leaseholders to reside in, rent out, or otherwise manage their residential or commercial property. Some of the primary provisions of the new law consist of:

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

- Making it cheaper and much easier to extend your lease or buy the freehold for existing leaseholders in both homes and flats.

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

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

- Making buying or offering a leasehold residential or commercial property quicker and simpler, with an optimal time and fee for the arrangement of information to a leaseholder by the freeholder.

- Requiring transparency over service charges for leaseholders. I.e.: Freeholders or their management companies need to reveal plainly and transparently how they charge for all components of their service fee costs.

- 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 must pay the freeholders' legal costs when challenging bad practice.

- Granting freehold house owners on private and mixed tenure 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 fund structure remediation work.

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


These legal rights and protections represent an ongoing effort to make leasehold residential or commercial properties less pricey and complicated to own. This is excellent news for anyone looking to buy this type of residential or commercial property now or in the coming years. The HomeOwners Alliance has even more thorough details about the main subjects of dispute for leasehold law modifications, so take an appearance if you wish to discover more.

If you need more suggestions on legal terms and concerns around residential or commercial property purchases, our guides area has whatever you require. We have guides on conveyancing, transfer of equity, ground rent and far more. We hope that this freehold vs leasehold guide offers you the ideal starting knowledge to help select the best residential or commercial property for your needs.

HomeViews is the only independent evaluation platform for residential advancements in the UK. Prospective purchasers and occupants use it to make a notified decision on where to live based upon insights from carefully confirmed resident evaluations. Part of Rightmove since February 2024, we're working with developers, home home builders, operators, housing associations and the Government to give residents a voice, acknowledge high performers and to assist enhance requirements throughout the market.