If you have started looking at flats in London, the word leasehold has almost certainly appeared in the listing. It may have been followed by a lease length — 99 years, 125 years, 999 years — and you may have moved on without fully understanding what it means for you as a buyer.
What is leasehold, and does it matter? It does, and the answer goes beyond a definition. Lease length, ongoing costs, ground rent terms, and planned building works can all affect how much a leasehold property actually costs to own — and how easy it is to sell. This guide explains all of it in plain terms.
Leasehold vs Freehold: The Core Distinction
There are two main forms of property ownership in England and Wales: freehold and leasehold.
Freehold means you own the property and the land it sits on, outright and indefinitely. There is no time limit, no landlord above you, and no lease running down. Most houses in England are sold freehold.
Leasehold means you own the right to occupy the property for a fixed period — the term of the lease — but not the land beneath it. That land (and usually the structure of the building itself) is owned by a freeholder, sometimes called the landlord. Most flats in England and Wales are leasehold, and in London the proportion is higher still.
When you buy a leasehold property, you are purchasing the remaining years on the lease from its current owner. If the lease was originally granted for 125 years and the current owner has held it for 20 years, you are buying a lease with approximately 105 years remaining. Every year that passes reduces the term — and as we will see, that reduction has real financial consequences once it falls below certain thresholds.
What Does a Leaseholder Actually Own?
This is where many first-time buyers are surprised. When you buy a leasehold flat, you typically own:
- The interior of your flat — the rooms, fixtures, and fittings within the four walls
- The right to occupy and use the property for the remaining lease term
- In some cases, a share of the freehold of the whole building (see below)
You do not own:
- The land the building sits on
- The external structure — walls, roof, foundations, common pipes and cables
- Communal areas — hallways, staircases, lifts, external gardens and car parks
The freeholder (or their managing agent) is responsible for maintaining and insuring those shared and structural elements. You contribute to the cost through a service charge. This is not optional — it is a legal obligation under the lease.
The Costs That Come With Leasehold
Leasehold ownership carries ongoing financial obligations that freehold does not. Understanding these in full before you buy is essential.
Service charge
An annual payment covering communal maintenance, building insurance, management fees, cleaning, and repairs to shared areas. Service charges vary significantly — a few hundred pounds a year in a small, well-maintained block to several thousand in a larger development with extensive facilities or an ageing building fabric. They can increase over time, and you have limited ability to challenge them unless you formally request a summary of costs from the managing agent.
Before exchanging on any leasehold flat, always ask for three years of service charge accounts. Look for trends — steady increases, large unexplained payments, or reserves that are thin relative to the age of the building are all worth questioning.
Ground rent
Ground rent is a periodic payment to the freeholder for use of the land. Under the Leasehold Reform (Ground Rent) Act 2022, ground rent on new residential leases in England has been set at a peppercorn — effectively zero. However, many existing leases still carry ground rent obligations, and some older leases include doubling clauses that increase the ground rent at set intervals. A lease with ground rent that doubles every 10 or 25 years can accumulate into a significant cost over the decades.
Always check the ground rent terms explicitly before making an offer.
Major works and Section 20 notices
The freeholder or managing agent can carry out major works to the building — roof replacement, external decoration, lift maintenance — and charge the cost to leaseholders. Where the cost exceeds a threshold (currently £250 per leaseholder), they must serve a formal Section 20 notice. A pending Section 20 notice is one of the most important things your conveyancer will look for, because it can mean an unexpected bill of thousands of pounds shortly after you move in.
Ask the selling agent directly: are any major works planned, and has any Section 20 notice been served?
Lease extension costs
Extending a lease costs money — and the shorter the remaining term, the more it costs. Once a lease falls below 80 years, the cost of extension rises substantially because the freeholder becomes entitled to “marriage value” (see FAQ below). Many buyers purchase a flat and extend the lease shortly afterwards, which is now possible from the day of purchase following the Leasehold and Freehold Reform Act 2024.
Why Lease Length Matters
The number of years remaining on a lease affects three things simultaneously: the property’s value, your ability to get a mortgage on it, and the cost of extending the lease. These are not independent — they compound.
Most mortgage lenders in the UK require a minimum of 70 to 80 years remaining on the lease at the point of application, and some require the lease to extend at least 25 years beyond the mortgage term. A property with fewer than 70 years on the lease will be unmortgageable with most mainstream lenders, which means the pool of potential buyers shrinks dramatically at resale — forcing a price reduction.
Below 80 years, the cost of lease extension rises because of marriage value. Above 80 years, extension costs are predictable and typically more manageable.
A 999-year lease is effectively equivalent to freehold for practical purposes. A 125-year lease on a flat bought today gives the next buyer around a century, which is entirely workable. A 72-year lease is already approaching the zone where buyers and lenders become cautious.
The four numbers every leasehold buyer should confirm before making an offer:
- How many years remain on the lease?
- What has the service charge been for the past three years?
- Are any major works planned, and has a Section 20 notice been served?
- What is the ground rent, and does it escalate?
Share of Freehold: Why It Matters
Some leasehold flats are sold with a share of freehold, meaning the flat owners in the building have collectively purchased the freehold between them — usually through a management company in which each leaseholder holds a share.
Share of freehold is generally regarded as more secure and more desirable. The leaseholders collectively control the management company, can extend their own leases at a nominal cost, and have direct say over service charges and building maintenance. It is not the same as owning freehold outright — you still have a lease — but the practical disadvantages of ordinary leasehold are significantly reduced.
Buyers typically pay a small premium for share of freehold flats, and they sell more easily.
Commonhold: The Tenure That May Replace Leasehold
Commonhold is a form of ownership in which each flat owner holds the freehold of their own unit, and a residents’ association collectively owns and manages the common parts. Introduced in England and Wales in 2004, it has been used rarely in practice.
The government has signalled that commonhold will become the default tenure for new flats in England as leasehold reform progresses. The Leasehold and Freehold Reform Act 2024 is the first legislative step. For buyers today, most new-build flats are still sold leasehold, but this is likely to change over the coming decade.
What the Leasehold and Freehold Reform Act 2024 Changed
The Act, which received Royal Assent in May 2024, introduced several reforms that take effect in phases:
- No two-year wait: from January 2025, leaseholders can apply to extend their lease from the day of purchase, rather than waiting two years
- Wider Right to Manage: more leaseholders can now apply to take over management of their building without needing to demonstrate management failure
- Ban on new leasehold houses: new houses in England and Wales can no longer be sold as leasehold (flats remain leasehold for now)
- Ground rent capped: confirmed at peppercorn for all new leases; the government is consulting on reducing ground rents on existing leases
Further legislation is expected. Leasehold reform is ongoing.
For further information on leasehold rights and extension, check: Leasehold Advisory Service
Is Leasehold Worth Buying?
For most flat buyers in London, the practical question is not leasehold vs freehold — it is which leasehold property is the right one. The majority of flats available are leasehold, and that is unlikely to change quickly.
The key is understanding what you are buying. A flat with a long lease, a share of freehold, reasonable and transparent service charges, and a well-maintained building can be a sound investment. A flat with 73 years on the lease, escalating ground rent, no sinking fund, and a deferred major works programme is a different proposition — and the asking price may not reflect all of those risks.
Your conveyancer will examine the lease in detail during the conveyancing process. But the four questions above should be answered before you even make an offer.
For the government’s guidance on leasehold reform, check: GOV.UK — leasehold and freehold reform
Conclusion
Leasehold is a form of property ownership, not a synonym for renting. In London, it is the standard tenure for flats and is widely used without difficulty when the lease is long, the management is competent, and the costs are transparent.
What matters — and what many buyers discover too late — is the detail. Lease length, service charge trajectory, ground rent terms, and pending works are all knowable before exchange. Taking the time to understand them is the difference between a straightforward purchase and one that costs significantly more than the asking price over time.
Frequently Asked Questions
Is leasehold the same as renting?
No. A leaseholder has purchased the right to occupy a property for the lease term — which typically runs for decades or centuries — and owns the interior of the flat. A renter has a tenancy agreement, usually periodic or for a fixed term of months or a year or two.
Can I get a mortgage on a leasehold flat?
Yes, most leasehold flats are mortgageable. Most lenders require a minimum of 70 to 80 years remaining on the lease at the time of application, and the lease should ideally extend at least 25 years beyond the mortgage term. Very short leases or unusual terms can restrict which lenders will offer finance.
What is the 80-year rule in leasehold?
