TL;DR
Buying leasehold means buying the right to occupy a property for a fixed term, not the land or building itself. Ground rent, service charges and major works levies are ongoing obligations
Last reviewed: June 2026 | Sources: Property
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Property Key Facts: Buying Leasehold Lease under 80 years: expensive to extend — act before thisGround rent: check for doubling clausesService charges: variable — check last 3 years accountsMajor works: can be levied without fixed capRegulator: LEASE / SRA |
What leasehold ownership means
Leasehold ownership means owning the right to occupy a property for the remaining term of the lease. The land and structure are typically owned by the freeholder. Lease terms of 99, 125 or 999 years are common at inception but reduce over time. The leaseholder pays ground rent to the freeholder and service charges to the managing agent for the building's maintenance and insurance.
The risks most people do not check
A lease under 80 years is significantly more expensive to extend. Lease extension costs increase as the lease shortens. Below 80 years, marriage value becomes payable to the freeholder, which can add tens of thousands of pounds to the extension cost. Always check the remaining lease length before offering and factor extension costs into the purchase price.
Service charges are variable and can be very significant. Service charges are not fixed and can increase substantially, particularly after major works. Major works levies can be thousands or tens of thousands of pounds. Review the last three years' service charge accounts and any Section 20 major works notices before exchanging.
Ground rent doubling clauses are problematic. Some leases contain ground rent clauses that double at set intervals. Mortgage lenders have become increasingly unwilling to lend on properties with such clauses. The Leasehold Reform (Ground Rent) Act 2022 caps ground rent at a peppercorn for new leases but does not fix existing problematic leases.
Management quality significantly affects living costs. The managing agent appointed by the freeholder controls maintenance standards and service charge levels. Research the managing agent's reputation and review the accounts carefully. Poor management can lead to high charges and deteriorating building conditions.
What to verify before offering
Check the remaining lease length. Request three years' service charge accounts. Check the ground rent terms in the lease for any escalation clauses. Ask about any anticipated major works or Section 20 consultations. Research the managing agent.
Where to complain
Service charge disputes go to the First-tier Tribunal (Property Chamber). Managing agent complaints go to The Property Ombudsman or the Property Redress Scheme. Conveyancer complaints go to the Legal Ombudsman.
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Disclaimer This article is for information only and does not constitute regulated financial advice. Always verify current terms with relevant providers and seek regulated advice for your specific circumstances. Kael Tripton Ltd is an independent editorial publisher and is not regulated by the FCA. |
Frequently asked questions
What is the difference between leasehold and freehold?
Freehold means owning the property and land outright with no time limit. Leasehold means owning the right to occupy for the remaining lease term. Houses are typically sold freehold; flats are typically sold leasehold. Leasehold reform legislation has sought to improve leaseholder rights.
Can I extend my lease as a leaseholder?
Qualifying leaseholders have a statutory right to extend their lease by 90 years (for flats) or 50 years (for houses) at a ground rent of zero. Qualification requires ownership for two years. The extension cost depends on the remaining lease length, ground rent and property value.
What is a Section 20 notice?
A Section 20 notice is a consultation notice issued by the freeholder or managing agent before major works where the cost exceeds £250 per leaseholder. It gives leaseholders the opportunity to comment on proposed works and contractors. Failure to consult properly can limit the amount a freeholder can recover in service charges.
What is enfranchisement?
Enfranchisement is the right of qualifying leaseholders collectively to purchase the freehold of their building. It requires at least 50 percent of flat owners in a building to participate. Collective enfranchisement gives leaseholders control of the building management and the ability to grant new leases.
Are new-build flats always leasehold?
New-build flats are typically leasehold. New-build houses have historically been sold leasehold but government reform has made this less common. The Leasehold and Freehold Reform Act 2024 has introduced further changes to leaseholder rights. Check the tenure of any new-build property specifically.
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Sources LEASE: Leasehold Advisory Service |
