Buying a leasehold property can feel confusing, especially if it’s your first home. Leasehold is simply one way to own property in England and Wales. It applies most commonly to flats, but it can also apply to some houses.
In this guide, we explain how leasehold works, what you actually own, the costs involved, and why leasehold flats and leasehold houses are not the same.
What does leasehold actually mean?
If you buy a leasehold property, you own the right to live in the property for a fixed period of time. This is called the lease term.
You do not own the building or land it stands on outright. The building and the land are usually owned by a freeholder (also called the landlord. You’ll sign a legal agreement with them called a lease, which tells you how many years you’ll own the right to live in the property for – this could be anytime from 99 years to 999 years.
Your lease will explain:
- Your rights
- Your responsibilities
- Any payments you must make
- Rules you must follow
Why does leasehold exist?
Leasehold developed primarily as a practical way to manage shared buildings, particularly flats.
When several people live in the same building, someone needs to be responsible for:
- The roof
- The structure
- The communal areas
- Buildings insurance
- Maintenance and repairs
Leasehold provides a framework for sharing those responsibilities and costs.
For flats, it is still the most common ownership structure. Shared homeownership homes are also sold as leasehold. Sometimes, new homes are sold as leasehold as the developer does not own the freehold.
Leasehold flats explained
What do you actually own?
When you buy a leasehold flat, you own:
- The right to live in the flat for the remaining lease term
- The legal interest described in the lease
You do not own:
- The building structure
- The communal areas (like the hallways or stairs)
- The land it sits on
Those are usually owned by the freeholder or managed by a management company.
Service charges and shared costs
Most leasehold flats require owners to pay service charges.
These cover shared costs such as:
- Buildings insurance
- Maintenance of communal areas
- Repairs to the roof and structure
- Cleaning and lighting in shared spaces
In larger developments, charges may also cover:
- Lifts
- Concierge services
- Gardens
- Gym or leisure facilities
Some buildings operate a reserve or sinking fund, which builds up money over time for major works.
Service charges vary significantly depending on the property, and usually increase every year. They’re either paid in advance based on estimates or repairs and maintenance or in arrears.
Ground rent
Ground rent is an annual payment made to the freeholder.
Historically, ground rents were often very small (peppercorn) or a modest fixed amount.
In some modern leases, ground rent increased over time, sometimes significantly.
It’s important to check:
- How much ground rent is payable
- Whether it increases
- When any increases occur
Current law now restricts ground rent on many new leases under the Leasehold Reform (Ground Rent) Act 2022, but older leases may still contain ground rent provisions.
Why leasehold is common for flats
Leasehold remains the standard structure for most flats because it provides a clear framework for shared responsibility, allows coordinated building management and sets out rules to protect the building’s structure and value
However, reforms are ongoing, and the system continues to evolve.
Leasehold houses explained
Leasehold houses are less common than flats, but they do exist, particularly on newer developments, or through shared ownership schemes.
Unlike flats, houses do not usually share walls, roofs, or communal entrances.
This means there are often fewer shared benefits, the rationale for leasehold can be less clear to buyers, and management arrangements may feel more like additional control than shared necessity
For this reason, leasehold houses have attracted significant attention in recent years.
Ground rent and permissions
Leasehold houses may still include:
- Ground rent payments
- Restrictions on alterations
- Requirements for landlord consent for certain changes
It’s essential to review the lease carefully before buying.
Why buyers should scrutinise leasehold houses carefully
Because houses are typically freehold in the UK, buyers often expect outright ownership.
When a house is leasehold, it’s especially important to understand:
- How long the lease has left
- Whether ground rent increases
- What permissions are required
- What costs may arise in future
- Whether you can extend the lease
- Whether you can buy a share of the freehold
- Whether youl have the right to take over management of the property
- Any restrictions in the lease (for example, if you cannot run a business from the property)
Early advice helps prevent surprises later.
What are the costs and financial commitments of leasehold?
Leasehold properties involve additional layers of financial responsibility.
Here’s how the main costs compare.
Ground Rent
- Historically – sometimes low, sometimes escalating.
- Modern leases are often restricted under current legislation.
- Older leases may still include ground rent terms.
Service Charges
- Common for flats.
- Less common for houses, but may exist on estates.
- Can vary widely depending on services provided.
Other Potential Costs
Depending on the lease, you may also encounter:
- Management company fees
- Permission fees for alterations
- Notice fees on sale
- Contribution towards major works
Your conveyancer will review these before you commit to purchase.
What are the mortgage and resale considerations of leasehold?
Lenders assess leasehold properties carefully.
They will consider:
- Remaining lease length – if the lease term is too short, for example under 80 years, mortgage lenders may require it to be extended or you won’t be able to borrow as much, your mortgage interest rate may increase and it may be harder to sell
- Ground rent terms – lenders look closely at the amount payable and whether it increases. Where ground rent exceeds 0.1% of the property value, or reaches £250 per year outside London (£1,000 in London), mortgage options can become more limited and you may find it harder to sell
- Service charge structure
- Building management arrangements
Leasehold houses can sometimes raise additional questions for lenders, depending on the structure of the estate.
Proposed changes to Commonhold and Leasehold Reform – where things are heading
The Government’s draft Commonhold and Leasehold Reform Bill 2026 proposes changes to ground rents on existing leases, restrictions on new leasehold flats, reforms to forfeiture, and a stronger legal framework for commonhold.
You can read our detailed overview of current proposals in our guide to leasehold reform.
In simple terms:
- Leasehold remains the current system.
- Reform is focused on improving transparency, fairness, and long-term ownership structures.
- Commonhold is being strengthened as a potential alternative for future developments.
Nothing changes automatically for existing properties unless new legislation is passed.
What should buyers look out for?
Before buying any leasehold property, ask:
- How long is left on the lease?
- What is the ground rent?
- Does it increase?
- What are the service charges?
- What permissions are required for changes?
- Are there any upcoming major works?
Understanding these early prevents delays and unexpected costs.
Understanding leasehold before you commit
Leasehold properties come with extra layers of complexity, and without clear advice, buyers can feel overwhelmed.
Leasehold flats and leasehold houses are not the same.
Flats are typically structured around shared buildings and shared costs, while houses are usually expected to be freehold, so leasehold houses require closer scrutiny.
Buying property is one of the biggest financial decisions you’ll make. Clear advice helps you move forward with confidence. If you’d like guidance on buying a leasehold property, extending a lease, or understanding your rights, our team is here to help. Call us on 0333 3055 249 or email info@leadingpropertylawyers.co.uk.
