Leasehold & Freehold – what’s the difference?

When buying a property in England or Wales there are two main types – freehold and leasehold. In a nutshell, they mean the following…

Freehold: Someone who owns the freehold of a property owns the property and the land it stands on.

Owning the freehold means you own the property outright including the land it’s built on, for an unlimited period. Interestingly, the Civil Aviation Act 1982 means you’ll also ‘own’ and have rights to the ‘airspace’ above your property up to about 500 feet.

Meanwhile, beneath your feet, in theory there’s no limit to the depth at which you cease to own the land your property is built on – although this is largely because it’s not been tested in court.

But as you own the property as well as the land, it also means you are responsible for all the upkeep and any repairs.

Leasehold: Unlike a freeholder, as a leaseholder you do not own the land the property is built on. A leaseholder essentially rents the property from the freeholder for a number of years, decades or centuries. 

Most flats are sold as leasehold properties with the freehold held by the builder or a firm he or she has sold the freehold to. However, this isn’t always the case. Some flats – especially in houses converted into many flats – are sold on the basis that the owner shares the freehold with others in the same building, known as ‘share of freehold’.

Houses tend to be sold as freehold properties as it’s a more clear-cut scenario, given there’s only one property on that piece of land.

Owning the leasehold gives you the right to live in a property for a set period of time – which can be years, decades or centuries.

But it’s important to understand that in the eyes of the law, you’re essentially a tenant of the freeholder for that period. Also, you don’t technically own the property, you own the lease – even though you can obviously buy and sell the physical property.

Under most lease agreements you will have to pay an annual ground rent, which can increase over time. Historically a typical lease length was 99 years, although more recently 125 years has become the standard, while some last as long as 999 years.