What is Leasehold?
Leasehold is a form of property ownership where you own the right to occupy a property for a fixed period of time, rather than owning it outright. When you buy a leasehold property, you're purchasing the remaining term of a lease that was originally granted by the freeholder (the person or company who owns the land and building). In England and Wales, most flats are sold as leasehold, while most houses are sold as freehold.
The crucial difference from freehold ownership is time. A freehold lasts forever. A leasehold counts down. When your lease eventually expires, the property reverts to the freeholder unless you've extended your lease or purchased the freehold beforehand.
A Simple Example
Imagine you buy a flat in a converted Victorian house. The property was originally sold on a 99-year lease in 1990. When you purchase it in 2025, there are 64 years remaining on the lease.
You own the flat itself and have the legal right to live there for those 64 years. But you don't own the land it sits on, nor the structure of the building. The freeholder owns those. Each year that passes, your lease gets one year shorter. By 2045, you'll have just 44 years left. By 2065, only 24 years.
This countdown matters because the shorter your lease becomes, the less your property is worth, the harder it becomes to sell, and the more expensive it becomes to extend.
Why It Matters to You
If you own or are buying a leasehold property, you need to understand three things:
Your lease is a depleting asset. Unlike freehold property, which you own indefinitely, your leasehold interest loses value as time passes. This isn't theoretical. A flat with 99 years remaining is worth significantly more than the same flat with 70 years remaining. Mortgage lenders know this, buyers know this, and valuers factor it into every assessment.
You have ongoing obligations. As a leaseholder, you typically pay ground rent to the freeholder (though this reduces to zero when you extend your lease). You also pay service charges for building maintenance, insurance and management. Your lease will contain covenants setting out what you can and cannot do with your property.
You have legal rights. The good news is that leaseholders in England and Wales have statutory rights to extend their lease or, in some cases, purchase the freehold. These rights exist precisely because Parliament recognised that the leasehold system can disadvantage homeowners.
Leasehold vs Freehold
The distinction is fundamental:
Freehold: You own the property and the land it sits on, indefinitely. No countdown, no ground rent, no landlord. Most houses in England and Wales are freehold.
Leasehold: You own the right to occupy the property for a fixed term. You have a landlord (the freeholder). Your ownership expires when the lease ends. Most flats in England and Wales are leasehold.
Why are flats usually leasehold? Because multiple people live in the same building. Someone needs to own and maintain the structure, common areas, roof and foundations. That someone is typically the freeholder, who grants individual leases to each flat owner.
Some flat owners have a "share of freehold," meaning they collectively own the freehold through a management company. This gives more control, but each flat is still technically held on a lease.
The Critical Lease Length Thresholds
Not all lease lengths are equal in the eyes of lenders, buyers and the law:
Above 80 years: Generally mortgageable and saleable without major issues. Lenders typically want at least 80-85 years remaining at the end of the mortgage term.
Below 80 years: A critical threshold. Once your lease drops below 80 years, extending it becomes significantly more expensive because of marriage value. The freeholder becomes entitled to half of the "marriage value" created by the extension.
Below 70 years: Many lenders become reluctant to offer mortgages. Your pool of potential buyers shrinks considerably.
Below 60 years: Very difficult to mortgage. Often requires a cash buyer, which typically means accepting a significant discount on price.
At expiry: If your lease runs out entirely without being extended, the property reverts to the freeholder. You lose your home.
Your Rights as a Leaseholder
Parliament has given leaseholders important statutory rights:
The right to extend your lease: Under the Leasehold Reform, Housing and Urban Development Act 1993, qualifying leaseholders of flats can extend their lease by 90 years on top of whatever time remains, with ground rent reduced to a peppercorn (effectively zero). The Leasehold and Freehold Reform Act 2024 has removed the previous requirement to have owned your property for two years before exercising this right.
The right to buy your freehold: If you own a leasehold house, you may have the right to purchase the freehold outright. Flat owners can join with their neighbours through collective enfranchisement to buy the building's freehold together.
The right to manage: Leaseholders can take over management of their building without buying the freehold.
The right to challenge unreasonable charges: Service charges and administration fees can be challenged at the First-tier Tribunal (Property Chamber) if they're unreasonable.
Recent and Upcoming Reforms
The leasehold system has faced sustained criticism, and reform is ongoing:
Already in effect (2025):
- No two-year ownership requirement before extending your lease
- Leaseholders no longer pay the freeholder's legal costs when extending
- Ground rent on new leases must be set at zero
Pending implementation:
- 990-year lease extensions (up from 90 years for flats)
- Abolition of marriage value (would significantly reduce extension costs)
- Standardised valuation methodology
These reforms aim to make leasehold fairer, but until they're fully implemented, the existing system remains in place.
In Summary
Leasehold means you own your property for a fixed period, not forever. Your lease is a countdown clock, and as it gets shorter, your property becomes less valuable, harder to mortgage, and more expensive to extend.
The system exists primarily for flats where multiple owners share a building, but it comes with real costs and limitations. The good news is that you have legal rights to extend your lease or buy your freehold, and recent reforms have made these rights more accessible.
The key is to understand where you stand and act before your lease gets too short. If you're approaching 80 years or already below it, extending sooner rather than later will almost certainly save you money.
Want to know exactly where your lease stands? Get your free lease report to see your remaining term, estimated extension costs, and how waiting affects the price.
