Freehold vs Leasehold: What Every International Investor Needs to Know

Freehold means you own the building and the land it sits on, with no time limit and no landlord. Leasehold means you have bought the right to occupy a property for a fixed number of years, granted by whoever owns the freehold. That number counts down. When it reaches zero, the property reverts to the freeholder.

Almost every flat in England and Wales is leasehold. Most houses are freehold, although some aren’t. If you’re buying from overseas, this is the single most important line in the listing, and it’s often the line nobody explains to you.

The difference in one table

	Freehold	Leasehold
How long you own it	Forever	A fixed term, counting down
Annual ground rent	None	Possible, depending on when the lease was granted
Service charge	None, unless it’s an estate with a management company	Usually, and it’s variable
Who decides on repairs	You	The freeholder or the management company
Sell or remortgage	Straightforward	Depends heavily on years remaining
What you can be charged for	Your own repairs	Your share of the block, plus fees for consents and information packs

What a lease actually is

A lease is a contract with a start date and a length. A flat sold in 1985 on a 125 year lease expires in 2110. Today, in 2026, that lease has 84 years left. Buy it and you’re buying 84 years, not a building.

The lease also sets out what you may and may not do: whether you can let the property, whether you need written consent to do so, whether pets are allowed, who insures the block, and what share of the building’s costs you pay. Read it. Your solicitor will summarise it, but the clauses that cost money are usually the boring ones.

Ground rent

Ground rent is a payment to the freeholder for the land. It buys you nothing. On older leases it might be a few pounds a year. On leases granted during the 2000s and 2010s it’s often several hundred pounds a year, sometimes with a review clause that doubles it every ten or fifteen years. A doubling clause is the thing that made some flats unsellable, because the rent compounds into a number no future buyer will accept.

The Leasehold Reform (Ground Rent) Act 2022 stopped this for new leases. Residential leases granted on or after 30 June 2022, and retirement leases from 1 April 2023, can only charge a peppercorn ground rent, which means nothing at all. It doesn’t apply retrospectively. If you’re buying a second hand flat, the old ground rent in the old lease still stands. Ask what it’s and ask how it reviews.

One recent change helps: since 27 December 2025 a long lease of over 21 years is no longer treated as an assured tenancy however high the ground rent is, which removes an old and genuinely alarming risk that a freeholder could seek possession for unpaid ground rent.

Service charges, and the bill nobody budgets for

The service charge is your share of running the building: buildings insurance, communal lighting, cleaning, lifts, the managing agent’s fee, and the reserve fund. It’s variable. It goes up.

The one that hurts is major works. A new roof, new windows, or a rewire is billed to leaseholders in proportion. If your share is £14,000, you owe £14,000, whether or not you were expecting it. Where planned works will cost any one leaseholder more than £250, the landlord must consult you formally under the Section 20 procedure first. For contracts running longer than twelve months, the threshold is £100 a year. Consultation isn’t a veto. It means you get notice and the right to comment, not the right to refuse.

You can challenge a service charge you think is unreasonable at the First-tier Tribunal, and you can demand a written summary of how it was calculated. Both are real rights and both take time.

Before you offer on a leasehold flat, ask for the last three years of service charge accounts, the current annual demand, the reserve fund balance, and any Section 20 notices issued or planned. If the seller can’t produce them, that’s information in itself.

Why a short lease is a serious problem

Two things happen as a lease shortens.

First, lenders lose interest. Most mortgage lenders want a comfortable margin of lease remaining at the end of the mortgage term, so a lease in the seventies or lower starts to shrink your pool of future buyers to cash purchasers only.

Second, the cost of extending jumps once the lease drops below 80 years. Under the current valuation rules, below 80 years the freeholder becomes entitled to a share of the “marriage value”, the extra value created by the extension. That premium can run to tens of thousands of pounds. A lease at 82 years is a different asset from a lease at 78 years, and the price should reflect it.

You do have a statutory right to extend. For a flat it’s an extra 90 years with the ground rent reduced to a peppercorn. For a house it is 50 years. Since January 2025 you no longer have to have owned the property for two years first, so a buyer can start a claim straight away.

Where the Leasehold and Freehold Reform Act 2024 has actually got to

This matters because a lot of what you will read online describes reforms as though they are already law. As at 25 August 2026, according to the GOV.UK leasehold toolkit, updated 20 May 2026:

In force now: the two year ownership requirement for lease extension and freehold purchase claims is gone; Right to Manage is easier, with the non-residential limit raised from 25% to 50% and freeholders’ legal costs no longer recoverable from leaseholders in most cases; long leases are excluded from the assured tenancy regime.

Not in force: the changes to how lease extension and freehold purchase premiums are calculated, including the abolition of marriage value. The Government has said the enfranchisement valuation provisions need corrective primary legislation before they can commence, and a draft Commonhold and Leasehold Reform Bill was published in January 2026. The ground rent cap for existing leases and the promised service charge transparency rules are also not yet in force.

Don’t price a purchase on the assumption that extension will get cheaper on a known date. It might. Nobody can tell you when.

Freehold is not automatically free of charges

Some modern freehold houses sit on private estates where the roads, drainage and open spaces were never adopted by the council. Buyers there pay an estate management charge to a private company, and until recently they had far weaker rights to challenge it than leaseholders do. The 2024 Act includes protections for these owners, but they’re among the provisions still awaiting commencement. If you’re buying a new build freehold, ask whether there’s an estate rentcharge or management charge, and how much it is.

What I do about it

I buy freehold houses in South Yorkshire and North Nottinghamshire. That isn’t an ideological position, it’s a practical one: for a remote landlord, a freehold terrace with no ground rent, no service charge and no managing agent removes an entire category of unpredictable cost and an entire set of people who can send you a bill. 55 Hunt Lane in Doncaster, bought at £61,500 for an investor who has never been to the UK, lets at £650 a month with no leasehold overheads sitting behind it.

If a leasehold flat is genuinely the right buy, the diligence is heavier, not impossible. It just has to be done properly, in writing, before you commit.

What to do next

Ask five questions about any leasehold property before you make an offer: how many years remain, what is the ground rent and how does it review, what did the service charge cost in each of the last three years, what major works are planned, and who owns the freehold. Give the answers to your solicitor and ask them to price the risk.

If you want the broader picture first, read the complete guide to UK property ownership and whether foreigners can really own freehold property in the UK. If you’re deciding how to hold the property once you have chosen it, company versus personal ownership is the next question.

This is general information, not legal advice. Lease terms differ enormously between buildings. Have a conveyancing solicitor read the actual lease before you commit.