Leasehold vs. Freehold: What Property Buyers Need to Know in London

Buying property in London is a significant investment, and one of the most crucial decisions you’ll face is whether to purchase a leasehold or freehold property. Understanding the differences between these two ownership types is essential, as they impact everything from long-term costs to your level of control over the property.

In this guide, we’ll break down the key differences, explore common challenges, and highlight recent leasehold reforms to help you make an informed decision when buying a property in London.

What Is the Difference Between Leasehold and Freehold?

Freehold: Full Ownership and Control

A freehold property means you own both the building and the land it stands on outright. There are no ongoing lease payments, service charges, or ground rent. This type of ownership gives you complete control over maintenance and modifications. Houses, including mews houses and single-family homes, are typically sold as freehold properties in London.

Leasehold: Limited Ownership with Additional Costs

A leasehold property means you own the home for a fixed period, but not the land it sits on. The freeholder (landowner) retains ownership of the land, and leaseholders usually pay annual service charges, ground rent, and maintenance fees. Leasehold ownership is especially common in London flats and apartments, where communal spaces are shared.

Share of Freehold: A Hybrid Ownership Model

In some cases, a leaseholder may also own a share of freehold, meaning they own their leasehold flat and a portion of the building’s freehold. This arrangement provides more control over property management and reduces the complexity of lease extensions. While leases still exist under this model, extending them is usually a straightforward and inexpensive process.

How Common Are Leasehold Properties in London?

Leasehold properties are widespread in London, and knowing their prevalence can help you make a strategic investment decision.

• 36% of all dwellings in London are leasehold, the highest proportion in England (Source: GOV.UK).
• 50% of all property sales in London involve leasehold properties (Source: The Freehold Collective).
• Almost all flats in London are leasehold, while only 7% of houses are (Source: The Freehold Collective).
• Leasehold properties are cheaper upfront—in 2023, the average freehold property in the UK cost £300,000, which was 42% more than the average leasehold property (Source: Benshams).

Key Challenges of Leasehold Properties

Lease Length and Its Impact

One of the most important factors to check before purchasing a leasehold property is the remaining lease term. A lease below 80 years can significantly reduce property value, affect mortgage eligibility, and lead to expensive lease extension costs.

Service Charges and Ground Rent

Many leaseholders face high service charges and ground rent, sometimes with little justification. According to BBC News, some leaseholders have been charged excessive fees for unclear maintenance costs.

For example, Audra Woods and Alice Brown were billed over £20,000 for maintenance that was never fully explained. Cases like these highlight the risks of unpredictable costs in leasehold agreements.

Lack of Transparency in Management

Leaseholders often have limited control over management companies appointed by the freeholder. These companies handle building maintenance and communal services but may charge excessive fees with little accountability. Many leaseholders struggle to obtain clear cost breakdowns, leading to frustration and financial strain.

Leasehold Reforms: What’s Changing?

The UK government is introducing reforms to create greater transparency and fairness for leaseholders. Key changes include:

• Removing the two-year rule, allowing leaseholders to extend leases or buy the freehold sooner.
• Simplifying ‘right-to-manage’ laws, making it easier for leaseholders to take control of building management.
• Introducing the Leasehold and Commonhold Reform Bill, which aims to improve leaseholder rights.

These changes are expected to reduce unfair fees and give leaseholders more control over their properties.

How a Buying Agent Can Help

Navigating London’s property market—especially leasehold purchases—can be complex. As a buying agent, I offer expertise to help you make the best investment:

• Due Diligence – Ensuring you understand lease terms, service charges, and potential costs before committing.
• Negotiation Expertise – Helping you secure the most favourable deal on price and terms.
• Legal Guidance – Connecting you with trusted solicitors to clarify complex legal issues, whether you’re a UK resident or an overseas buyer.

Tips for Prospective Buyers

If you’re considering buying a leasehold property in London, keep these key tips in mind:

• Read the lease carefully to understand your rights and obligations.
• Ask about the building’s finances, including whether there is a sinking fund for future maintenance.
• Speak with other leaseholders to learn about potential upcoming costs and disputes.

Ultimately, the biggest challenges with leasehold properties revolve around control and transparency. Service charges can vary significantly depending on the building’s amenities, so it’s crucial to ensure that management practices are fair and cost-effective.

Watch My Video for More Insights

For a deeper dive into leasehold vs. freehold ownership in London, watch my video here: https://www.youtube.com/watch?v=rKHS6HIPRi0. I explore these key points in more detail and provide expert advice for buyers navigating the London property market.

If you have any questions or need personalised guidance, feel free to get in touch. I’m here to help you make a smart and informed property investment.