Freehold vs leasehold: Pros and cons in the UK

When you're searching for a property to buy, you'll come across two main terms: freehold and leasehold. And these terms may seem confusing if you’re new to the property market.

Understanding the difference between them is important though, because it affects everything from how long you own the property to how much it might cost you in the long run.

Let's break down the pros and cons of each.

What is a freehold property?

When you buy a freehold property – typically a house or detached home – you own it outright. This means the land and the building are yours for as long as you want to own them. You're in control, and there's no time limit on your ownership.

Pros of freehold

• Long-term investment. Because there's no lease expiry date, your property should retain its value better over time. You're not watching a ticking clock, worried about what happens when the lease gets shorter.

• Freedom and flexibility. You can make changes to your property without asking permission from a landlord. Want to extend your house, paint the walls a bold colour, or renovate the garden? Go ahead. It's yours.

• No ground rent or service charges. Unlike leaseholders, you won't have to pay ground rent to a freeholder or be hit with service charges for building maintenance. Any maintenance costs are yours to manage, but you have oversight on what they are.

• Inheritance and long-term planning. Passing your property on to your children or beneficiaries is straightforward. It’s harder to pass on a leasehold, but not impossible.

Cons of freehold

• Maintenance responsibility is yours. Every structural repair, roof replacement, and garden maintenance cost falls on your shoulders. This can be expensive and unpredictable.

• Potentially higher mortgage costs. Some lenders may be more cautious with freehold properties because you're responsible for all maintenance, which can theoretically affect the property's value.

• Limited to certain property types. In the UK, most flats are leasehold, so if you want an apartment in a city centre, freehold might not be an option.

What is a leasehold? property

A leasehold property is one where you buy the right to live in it for a fixed period – commonly 99 years, 125 years, or sometimes longer. After that period ends, ownership reverts to the freeholder. You own a lease, not the land underneath.

Pros of leasehold

• Shared maintenance costs. In a building with multiple leasehold owners, maintenance costs are shared through service charges. Nobody bears the full cost of a new roof alone.

• Lower purchase price. Leasehold properties are often cheaper than equivalent freehold properties, making the property market more accessible.

• Ideal for flats and apartments. If you want to buy a flat in a building, leasehold is usually your only option. It's the standard arrangement in the UK.

• Professional management. A managing agent typically handles building maintenance, so you may not always need to worry about finding reliable tradespeople or managing repairs yourself. That being said, it’s still common for internal issues and repairs to be up to the leaseholder to fix.

• Predictable costs. Service charges are usually fixed so you know roughly what your annual costs will be.

Cons of leasehold

• The lease gets shorter. This is the big one. As years pass, your lease shortens. A lease under 80 years can become harder to mortgage and insure, and its value can drop significantly. Eventually, if you haven't extended it, it becomes worthless once the lease has expired.

• Ground rent and service charges. On top of your mortgage, you'll pay ground rent to the freeholder and service charges for building maintenance. These can increase over time.

• Limited freedom to modify. You can't make major changes to your property without permission from the freeholder or a managing agent. Even minor alterations sometimes need approval.

• Lease extension costs. When your lease drops below 80 years, you'll need to extend it – and this can be expensive. It's important to keep this in mind.

• Complications when selling. Your property becomes harder to sell because buyers may become wary of short leases, and lenders become reluctant to lend.

Which is right for you?

The answer depends on your circumstances. If you're buying a house and planning to stay long-term, freehold offers peace of mind and long-term value. If you're drawn to city-centre living or want lower upfront costs, leasehold might be the practical choice – just make sure you factor in the lease length and understand the service charges. Whichever you choose, make sure you understand all the costs involved and ask your surveyor, solicitor, and mortgage lender for guidance specific to the property you're interested in.

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Upcoming changes to leasehold and freehold

The way homes are owned in England and Wales is set to change under the Leasehold and Freehold Reform Act 2024, which received Royal Assent in May 2024. The reforms are designed to make leasehold ownership fairer, cheaper, and more transparent, while strengthening the rights of both leaseholders and freeholders.

Under the new law, it will become easier and less expensive for leaseholders to extend their lease or buy their freehold. Standard lease extensions will increase to 990 years with no ground rent, and the current ‘marriage value’ charge will be scrapped. The Act also aims to ban new leasehold houses, improve transparency around service charges and building management costs, and extend rights to freehold homeowners on private or mixed-tenure estates.

While the Act has passed, many of its measures are not yet in force. But homeowners and buyers can expect a shift towards simpler, fairer property ownership in future.