If you're buying 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, however what do they in fact indicate? This easy guide lays out everything you require to learn 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 means that you own the structure in addition to the land it stands on. Freehold and leasehold are the 2 primary types of legally owning residential or commercial property in the UK. Freehold is the typical form of ownership for homes.

What is leasehold?

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

How do I understand 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 browse by postal code 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 currently owned the residential or commercial property and were asked to sign a lease agreement throughout 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 upfront to purchase than leasehold, but leasehold residential or commercial properties frequently come with extra costs and legal issues or limitations.

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

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

- The freeholder might not enable pets.

- 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 new owner might then levy service charges, such as an increase to any service charge, with little to no notification. Overall, when it comes to freehold vs. leasehold, owning a freehold residential or commercial property is easier 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 may consist of having access to common centers such as a gym or resident lounge within an advancement. 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 responsible for arranging it. However, the leaseholder will frequently need to contribute towards the cost of the works.

What are the advantages of buying a freehold?

The main advantage of buying a freehold is that you own the land your residential or commercial property rests on. You don't have to pay any service charges or ground lease. You also don't have to seek authorization to make changes to the residential or commercial property.

Freehold residential or commercial properties are also easier to sell. The closer a lease is to expiring, the harder it is to offer 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, however at an expense. Depending on the staying time on the lease, extending can cost 10s of thousands of pounds. However, this is altering - see our upgrade on the Leasehold and Freehold Reform Act at the bottom of this short article.

Is it worth purchasing 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 charges, and so on. However, be advised that purchasing the freehold on a leasehold residential or commercial property is typically a costly 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 just a long leasehold. It has the exact same benefits and disadvantages as a much shorter lease, with the exception of not having to stress over the lease running out or requiring a renewal.

Having a 999-year leasehold still wouldn't excuse you from paying any essential ground rent and service charges to the current freeholder, for example. The long lease time just removes among the main causes for issue 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 exact same type, because of the threats connected to leasing. The main issue being the number of remaining years on the lease. However, this is simply a general trend, not an outright 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 bases on. The title for the residential or commercial property will list you as the freeholder. You will have total ownership over that land up until you pick to sell it.

Buying.


Flying freeholds: All your questions addressed

Buying.


What does Share of Freehold suggest?

Buying.


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

For how long does a freehold last?

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

For how long 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 rapidly drop in worth. 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 occurs when a leasehold goes 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 utilized to be the case that if you have lived in a residential or commercial property for more than two years, you can 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 pay for this extension. Extension fees can cost as much as 20 percent of your residential or commercial property's worth. Again, the just recently signed Reform Act aims 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 buy the freehold for their residential or commercial property with certain limitations. These consist of:

- The structure requires to include at least 2 apartments.

- At least 75% of the building is utilized for residential functions.

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

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

- If there are just 2 flats in the structure, both leaseholders must wish to purchase the freehold.


Once a group of leaseholders have actually purchased the freehold, they can set their own ground leas and service charges. However, they are then accountable for preserving the structure.

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 meet these requirements.

What do leaseholders typically challenge with freeholders?

Common disagreements made by leaseholders against 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 significant works are done. 18% experience issues when significant works are performed, such as extreme sound or disturbance.

Freehold vs. leasehold: which is much better?

The concern of freehold vs. leasehold is not a simple one. Buying a freehold residential or commercial property is normally easier and more versatile than a leasehold. However, most flats are leasehold residential or commercial properties.

If you are buying a leasehold, you need to check the length of time is left on the lease. The worth 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 likewise worth inspecting just how much the ground rent and service charges are if buying a leasehold residential or commercial property. Also, examine whether you get access to any common centers or other advantages.

If you actually do not wish to live in a leasehold residential or commercial property and you get on well with your neighbours, you may desire to consider buying 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 modifications to leaseholds

There's been a major reform of UK leasehold law on the cards for many years. The very first phase 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 stays excellent news if you mean to purchase a leasehold residential or commercial property to live in or lease.

The new law also implies that if you already have a leasehold residential or commercial property, the ground lease can not be increased. Once your existing lease term expires, the brand-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 arrangements initially laid out in the preliminary bill have been dropped, it has actually kept a number of changes that will make it much easier and cheaper for leaseholders to reside in, rent, or otherwise manage their residential or commercial property. Some of the primary arrangements of the new law include:

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

- Making it less expensive 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 existing 90 years, with ₤ 0 ground lease.

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

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

- Requiring openness over service fee for leaseholders. I.e.: Freeholders or their management companies need to reveal plainly and transparently how they charge for all aspects of their service charge fees.

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

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

- Scrapping the presumption that leaseholders need to pay the freeholders' legal expenses when challenging bad practice.

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

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

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


These legal rights and defenses represent an ongoing effort to make leasehold residential or commercial properties less expensive and complex to own. This is excellent news for anybody looking to purchase this kind of residential or commercial property now or in the coming years. The HomeOwners Alliance has further thorough information about the primary topics of debate for leasehold law modifications, so take a look if you want to learn more.

If you need more guidance on legal terms and concerns around residential or commercial property purchases, our guides section has everything you need. We have guides on conveyancing, transfer of equity, ground rent and far more. We hope that this freehold vs leasehold guide provides you the best beginning knowledge to help choose the right residential or commercial property for your needs.

HomeViews is the only independent evaluation platform for property developments in the UK. Prospective purchasers and tenants utilize it to make a notified decision on where to live based upon insights from carefully verified resident evaluations. Part of Rightmove considering that February 2024, we're working with developers, house builders, operators, housing associations and the Government to offer residents a voice, acknowledge high entertainers and to help enhance standards throughout the industry.