Tenure: Leasehold vs. Share of Freehold (Updated)
For anyone who isn’t aware, the most important point we want to highlight is that all flats are leasehold. Many people mistakenly believe that a flat with a Share of Freehold doesn’t have a lease. This is a common misconception. Flats with a Share of Freehold still come with an underlying lease.
If you’re confused and think that buying a flat with a share of the freehold means you won’t be purchasing a leasehold property, you’re mistaken. You will still be bound by a lease, along with its associated obligations and restrictions. It’s crucial for all flat buyers to understand it still involves a lease.
Where Are Leasehold Properties Found?
Leasehold properties can be in purpose-built blocks, converted houses, or above commercial or retail premises, and sometimes even entire houses (although few in London). Maisonettes, which typically have their own separate entrance or span two floors, also fall under leasehold ownership. Leasehold ownership of a flat gives you the right to occupy and use the flat for a long period, referred to as the “term” of the lease.
The lease term is fixed at the start and usually lasts 99, 125, or, in newer leases, up to 999 years. Without considering inflation, the flat’s value would diminish as the lease nears expiration. When the lease expires, the flat reverts to the landlord/freeholder.
What is Leasehold Ownership & Who is involved?
Leasehold ownership of a flat is governed by the lease, the contract that proves ownership of the flat and dictates the terms of that ownership.
The freeholder (also called the “landlord” in legal documentation) usually owns the building’s structure unless stated otherwise in the lease. The freeholder has obligations under the lease, including managing shared areas, organising insurance, and maintaining the building. In some cases, they may receive ground rent or income from lease extensions or by granting permission for alterations.
Formally, the leaseholder is considered a “tenant” of the freeholder, but this shouldn’t be confused with rental properties. As a leaseholder, you enjoy all the benefits of the property for the duration specified in the lease. You also bear its obligations.
Think of the lease as a rulebook for both your individual space (the demised premises) and the rest of the building. A common obligation might be contributing to a service charge for maintenance costs.
What is Share of Freehold?
Share of Freehold means that you, along with other owners, share ownership of the freehold. In effect, you co-own the freehold of the whole property through a residents’ management company.
Many people mistakenly believe that owning a share of the freehold means owning a physical part of the building. This is incorrect. Instead, owning a share of the freehold means you own shares in the management company that holds the freehold. As a result, a lease is still required to legally allocate each flat to its owner. The lease outlines your rights and obligations within your flat, communal areas, and the building.
Owning a share of the freehold provides more control. You, as a tenant and part of the management company, have more say in how the building is managed and maintained. However, this comes with greater responsibility. It requires working closely with your co-freeholders to make decisions about insuring and maintaining the building. If you don’t want to handle this yourself, you can hire a block management company to help. They will charge a fee but can provide neutral management when needed.
What Are the Main Leasehold Responsibilities?
If you own a leasehold property, you must pay the service charge when the freeholder requests it. This charge typically covers maintenance, building insurance, communal electricity, and administration costs (normally every six or twelve months). While you have less influence over how the building is managed, you also have fewer responsibilities. The freeholder is in charge of running the building and can pursue neighbours who refuse to pay their service charges. Not having this responsibility can be appealing to some.
Majority of Flats in London Are Leasehold – Not a Bad Thing
Around 63% of flats in London are leasehold. When searching for a property, we recommend focusing on the property itself rather than its tenure. A well-run property, regardless of its tenure, can offer a great living experience.
If the length of the lease concerns you, in most cases, you can extend it by 90 years. With the Leasehold and Freehold Reform Act 2024, which came into effect in January 2025, you no longer need to have owned the property for two years before extending the lease. This change eliminates the need to negotiate with the seller to transfer the right to extend during the purchase. Additionally, you can often acquire a share of the freehold further down the line if you want more involvement in decision-making. Many more leasehold flats will acquire a share of the freehold in the coming years.
Be Financially and Legally Prudent – A Long Lease is a Good Thing
A property with a long lease can be just as valuable as one with a share of the freehold.
The concept of “marriage value,” which applies when a lease has 80 years or less remaining, currently requires paying a premium to the landlord when extending the lease. This premium reflects the increased property value after the lease extension. However, upcoming reforms are expected to abolish this altogether (the proposed reform has not yet been implemented but is expected in 2026).
If you’re purchasing with a mortgage, lenders often require the lease to have at least 60 years remaining at the end of the mortgage term, though some lenders may accept 40 years or more. Properties with long leases are more appealing to lenders and buyers, making them easier to sell in the future.
Whenever possible, we recommend seeking properties with long leases. While they may be more expensive, they tend to offer better value over time.
Is a Leasehold Property Right for You?
The distinction between leasehold and share of freehold is a technicality and shouldn’t be your main concern when making an initial decision. At London Property Match, we help you find a property that fits your needs and protect your interests when it’s time to sell.
It’s essential to work with a good solicitor who can carefully review the lease, explain the building’s management, and clarify your responsibilities. Every building operates differently, and leases vary, so it’s vital to understand the specific terms of your lease. We can recommend excellent solicitors, including lease specialists, to guide you through the process.
Easing of Legislative and (Hopefully) Financial Restrictions Regarding Leasehold
Changes under the Leasehold and Freehold Reform Act 2024 make it easier and hopefully cheaper, in the future, for leaseholders to extend their lease or buy out the freehold of their building. The abolition of marriage value and the removal of freeholders’ costs are expected to reduce costs for many leaseholders. Although these changes are expected, we can’t yet say for certain if all leaseholders will save money. Stay updated through our blog for more information.
For more details, watch this helpful video from the Competition & Markets Authority: Video Link
This article uses information from The Leasehold Advisory Service, Competition & Markets Authority, The Law Society, and The Negotiator (article by Nigel Lewis, 23rd Jan 2025).
