Leasehold and freehold arrangements have historical roots, with the modern leasehold system started in the 1920s in the UK. Leasehold was introduced as a way for landowners to grant temporary use of their land in exchange for rent. Freehold, on the other hand, represents absolute ownership, providing stability and permanence.

Today, leasehold means you have the right to occupy a property, but you don't own the land. Freehold means you own both the property and the land it sits on outright.

Over time, these concepts evolved to meet changing property needs, which is what we will cover in this guide.

Understanding Leasehold Property

In the UK, a leasehold arrangement grants you the right to inhabit a property for a set duration as outlined in the lease agreement. It's important to note that in a leasehold, you do not own the land on which the property stands. Typically, leaseholders are required to pay ground rent to the freeholder, who is the owner of the land. The lease may also impose specific conditions that leaseholders must follow. Once the lease term concludes, ownership of the property reverts to the freeholder. While extensions or renewals are possible, they often involve additional expenses.

Rights and Responsibilities of Leasehold Property Owners

In a leasehold arrangement in the UK, leasehold property owners have rights and responsibilities that shape their tenure.


Leaseholders hold the fundamental right to occupy the property based on the terms set out in the lease agreement. This provides them with a legal framework for residence within the property for the stated duration. Additionally, leaseholders are entitled to receive all information about service charges and any significant works planned for the property. This information ensures that leaseholders stay well-informed about financial and structural aspects affecting their property. Furthermore, eligible leaseholders have the right to extend their lease, subject to specific conditions. This often incurs an additional fee.


Alongside these rights, leasehold property owners also have specific responsibilities. One of the most important is ensuring payments are made on time, including ground rent charges, service fees, and other costs as specified in the lease. These payments are crucial as leaseholders may be responsible for the maintenance and repair of the property and any shared areas. Compliance with the conditions specified in the lease is essential, as is adhering to rules on alterations or subletting.

Understanding Freehold Property Ownership

Freehold ownership in the UK means you have absolute, indefinite ownership of both the property and the land it occupies. In contrast to leasehold arrangements, there is no time limit attached to freehold ownership. Freeholders enjoy complete autonomy over their property, with the freedom to make modifications and decisions without seeking approval from a landlord.

Many people think a freehold lease is preferential however, they do have pros and cons:

Advantages of Freehold Property:

  • Unrestricted Ownership: Freehold property offers a sense of security as owners have full and permanent control over their property and the land.
  • Flexibility and Control: Freeholders have the flexibility to make changes to their property without the need to seek permission.
  • No Ground Rent Obligation: Unlike leasehold properties, freehold owners do not pay ground rent, reducing ongoing financial commitments.
  • Potential for Long-Term Value: Freehold properties often have better potential for long-term value appreciation compared to leasehold properties.

Disadvantages of Freehold Property:

  • Financial Responsibility: Freehold property owners are responsible for all property maintenance and repairs, which can be a significant ongoing cost.
  • Potential Selling Challenges: Selling a freehold property might take longer, as potential buyers may face higher upfront costs compared to leasehold properties.
  • Legal Responsibilities: Freeholders must navigate legal responsibilities, including adherence to local planning regulations and other legal aspects related to property ownership.

Common Leasehold Agreements

In the UK, leasehold lengths can vary, and they typically fall into three main categories:

  • Short Leases (e.g., 99-year lease): These leases provide the right to occupy a property for a specific period, often 99 years. However, as the lease approaches its end, the property's value may be affected, remortgaging can become more difficult, and lease extension costs could arise.
  • Medium-Length Leases: Lease terms falling between short and long leases, such as 125 or 150 years, offer a balance between initial affordability and a relatively extended period of ownership.
  • Long Leases (e.g., 999-year lease): Long leases provide a significantly extended period of ownership, often approaching or practically indefinite. Properties with long leases tend to maintain their value well over time.

Understanding the implications of different lease lengths is essential when considering property ownership. Short leases may offer affordability initially but come with potential challenges, while long leases provide stability and value over a longer period of time.

Right to Buy the Freehold

Leasehold enfranchisement is a legal process in the UK that gives specific rights to leasehold property owners, primarily centered around obtaining additional rights or extending existing leases. This process is the Leasehold Reform, Housing, and Urban Development Act 1993 (as amended). This legislation affords qualifying leasehold flat owners the right of first refusal when their landlord intends to sell the freehold. Additionally, it grants the option to extend the lease by 90 years with an additional, nominal peppercorn ground rent. Initiating this extension involves serving a Section 42 Notice to the freeholder.

Another aspect of leasehold enfranchisement is collective enfranchisement, allowing a collective purchase of the freehold by a group of leaseholders within a block of flats. The specific qualifying criteria and procedural steps for this collective acquisition are outlined within the Leasehold Reform, Housing, and Urban Development Act 1993.

The overarching objective of leasehold enfranchisement is to give leaseholders increased control over their property, mitigating ground rent, and extending the duration of leases. Nevertheless, given the legalese and complexity involved, seeking legal advice is advisable.

The Future of Leaseholds and Reform

The future of leaseholds in the UK is shifting towards significantly reduced usage and increased rights for existing leaseholders. This change is driven by recent legislation and ongoing reforms aimed at creating a fairer and more transparent housing system.

One significant development is the decline of new leaseholds. The Leasehold Reform (Ground Rent) Act 2022 banned ground rents for most newly built houses and flats, effectively eliminating a financial incentive for developers to use leasehold structures. Additionally, the Leasehold and Freehold Reform Bill, currently in Parliament, proposes a complete ban on the sale of new leasehold houses (with potential exceptions). These measures aim to make freehold ownership the default option for new homes, offering greater ownership and control to buyers.

For existing leaseholders, the future holds increased rights and protections. The aforementioned Leasehold and Freehold Reform Bill proposes several changes to benefit them. These include:

  • Making it cheaper and easier to extend leases by offering a standard term of 990 years with a ground rent reduced to zero.
  • Removing the two-year wait period before leaseholders can exercise their right to extend their lease or buy the freehold collectively.
  • Increasing the threshold for collective enfranchisement from 25% to 50% of commercial space, allowing more leaseholders to participate.

Beyond the ongoing legislative changes, the government is also considering further reforms to address existing challenges. These include:

  • Restricting ground rents for existing leaseholders, potentially through a cap on the amount that can be charged.
  • Addressing issues like unreasonable service charges and ensuring greater transparency in estate management.

Leasehold and Freehold Property in London

The future of leaseholds in the London property market is undergoing significant transformation, with a decline in their prevalence and a growing emphasis on protecting existing leaseholders. This trend is driven by the recent legislation and ongoing reforms discussed above, aiming to create a fairer and more transparent housing system.

Historically, leaseholds have been widely used in London, particularly for flats and apartments. This is partly due to the historical land ownership structure in the city, where large estates owned land and leased it out for development.

In the future, Londoners can expect to see fewer new leasehold properties due to the ban on ground rents and potential ban on new leasehold houses. Additionally, existing leaseholders will have more rights and protections, including easier and cheaper lease extensions and collective enfranchisement.

The Impact on Landlords and Property Investors

While the recent leasehold reforms are primarily aimed at benefiting leaseholders who own their homes, there are some potential indirect positive impacts for landlords and property investors.

The reforms aim to bring clarity to lease terms, minimising the likelihood of misunderstandings or disputes between leaseholders and landlords. This may result in reduced legal expenses and a more efficient process.

The emphasis on transparency and clarity in service charges could also simplify property management for landlords. Knowing the exact breakdown of charges and being able to justify them to leaseholders can help maintain positive relationships and avoid potential conflicts.

As London's property landscape evolves, navigating leasehold and freehold options can be tricky. Our experts can guide you through the process, ensuring a clear and informed decision for your future home. Contact us today for a chat.