Freehold vs leasehold (and the traps)

Buying your first home or first buy-to-let in England or Wales? This is the legal distinction that can quietly cost you tens of thousands. Here's what freehold and leasehold mean, the traps ranked by pain, and where the law stands as of July 2026, because it's moving, and half of what's online is out of date.

The plain definitions

Freehold: you own the building and the land it sits on, outright, forever. Nobody sends you a bill for owning your own home.

Leasehold: you own the right to live in the property for a fixed number of years: the lease. Someone else (the freeholder) owns the building and land. You pay them ground rent (maybe), service charges (probably), and permission fees (sometimes). When the lease runs out, the property reverts to them. In practice you extend long before that, for money.

Rule of thumb: houses should be freehold. Flats are almost always leasehold, so for a flat, the lease terms are the deal. A leasehold house is a red flag unless there's a genuine reason. A flat with a bad lease is a bad flat, whatever the kitchen looks like.

Trap 1: short leases and the 80-year cliff

The number of years left on the lease is the single most important line in a flat listing.

Under the current law, once a lease drops below 80 years, extending it gets sharply more expensive, because the freeholder becomes entitled to half of something called marriage value: the uplift in the flat's value created by extending the lease. Above 80 years, no marriage value. Below it, you're splitting the gain with the freeholder.

The 2026 status: check the date on anything you read. The Leasehold and Freehold Reform Act 2024 abolishes marriage value on paper, but as of July 2026 that part has not been switched on. It needs secondary legislation and a consultation on valuation rates, promised for summer 2025, since pushed back, and still awaited; a freeholder challenge was dismissed by the High Court in October 2025, but the Court of Appeal has since given freeholders permission to appeal, so the litigation continues. So the old rules, marriage value included, still apply to any extension you do today.

What has taken effect from the 2024 Act: the two-year ownership requirement before claiming a statutory lease extension was abolished (31 January 2025), and right-to-manage reforms landed in March 2025. The headline stuff (990-year extensions, marriage value gone) is still pending.

Practical rules:

90+ years left: fine.
80 to 90 years: negotiate the price down or plan to extend soon. Don't let it drift over the cliff.
Under 80 years: expect a materially bigger extension bill and twitchy lenders. Under about 70, some won't lend at all.

Worked example: what the cliff costs

Illustrative figures: every valuation is case-specific, so get a specialist surveyor's estimate before committing.

Say a flat is worth £250,000 with a long lease, and the lease has 81 years left. A statutory 90-year extension might cost roughly £10,000 to £12,000 in premium, plus legal and valuation fees on both sides, call it £13,000 to £15,000 all in.

Same flat at 79 years: similar premium, but now add marriage value. If extending adds, say, £20,000 to the flat's value, the freeholder gets half: £10,000 extra. Your bill is now more like £23,000 to £25,000.

Two years of drift, roughly £10,000 of extra cost. That's the cliff. If you're buying at 82 to 84 years, the clock is the negotiation.

Trap 2: ground rent

Ground rent is money for nothing: you get no service for it. The trap is escalation clauses: rents that double every 10 or 25 years, or track RPI. Doubling ground rents made some flats unmortgageable in the 2010s.

Where the law stands:

New leases: since the Leasehold Reform (Ground Rent) Act 2022 came into force (30 June 2022; 1 April 2023 for retirement properties), ground rent on most new residential leases must be a peppercorn: legally nothing.
Existing leases: unchanged. If the lease you're buying was granted before mid-2022, whatever ground rent clause it contains still applies.
The draft Commonhold and Leasehold Reform Bill (published January 2026) proposes capping ground rents on existing flat leases at £250 a year, reducing to a peppercorn over time. It's a draft, not law as of July 2026.

Read the ground rent clause before you offer. A rent over £250 a year (or 0.1% of the property value), or any doubling clause, will spook lenders and buyers. Say the catch out loud: an escalating ground rent doesn't just cost you money, it costs you your exit.

Trap 3: service charges

Service charges pay for maintaining the building: insurance, repairs, cleaning, lifts, the managing agent. Normal. Uncontrolled ones aren't. Check the last three years of accounts before buying.

What you can actually do:

Charges must be reasonable, and you can challenge them at the First-tier Tribunal (Property Chamber), whatever the lease says.
For major works costing any one leaseholder more than £250, the landlord must run a Section 20 consultation. Skip it (without tribunal dispensation) and they can't recover more than £250 per leaseholder for those works. For long-term agreements the limit is £100 a year.
You can demand a summary of costs and inspect the receipts behind them.

Trap 4: cladding and EWS1 (flats)

Post-Grenfell, fire-safety costs sank plenty of flat sales. The Building Safety Act 2022 protects qualifying leaseholders in buildings at least 11 metres or five storeys tall: they can't be charged for cladding remediation, and non-cladding safety costs are capped. Buildings under 11 metres sit outside those protections.

For flats in taller blocks, lenders may want an EWS1 form (an external wall fire assessment), a lender requirement, not law. RICS published updated valuation guidance in May 2026 (effective from November 2026), and expects the need for EWS1 forms to fall away over time. Ask early: is there a valid EWS1 or completed remediation? Get the seller's Leaseholder Deed of Certificate and the landlord's certificate. No paperwork, no mortgage, no sale.

Trap 5: forfeiture

The nuclear clause. Breach the lease and the freeholder can, in theory, take the flat back, and keep all the equity. There are protections: for rent, service or admin charge arrears, forfeiture can't even start unless you owe more than £350 or an amount unpaid for over three years, and a court process applies. It's rare, but the threat gets used to strong-arm leaseholders into paying disputed bills. The draft 2026 Bill proposes reform. Until then: never ignore a service charge demand. Dispute it formally instead.

Share of freehold

Common in converted houses: you own your flat's lease plus a share of the freehold, usually via a company owned by the flat owners. Best of both: you can grant yourselves long lease extensions for the cost of the paperwork and control the service charges. Catch: the lease itself still needs to be in good order, and you're co-managing a building with your neighbours. Check the company's accounts.

Commonhold: the future, not the present

Commonhold, owning your flat outright with a residents' association running the block, has existed since 2002 but is barely used. A Commonhold White Paper came in March 2025, then a draft Commonhold and Leasehold Reform Bill in January 2026, proposing new flats be sold as commonhold and leasehold sales of new flats banned later this decade. A Commons committee reported on the draft in May 2026; a full Bill is expected from autumn 2026. As of July 2026 none of this is law. Buy on the rules that exist, not the rules that are promised.

Mistakes people make

Not asking the lease length before viewing. First question, not a solicitor's-report surprise (your solicitor checks the lease during conveyancing, months after you've offered).
Buying at 80 to 82 years and doing nothing. The cliff doesn't wait for you to redecorate.
Waiting for reform to extend a sub-80-year lease. Marriage value abolition has been "coming" since 2024. Price on today's law.
Ignoring the ground rent schedule. A doubling clause is a resale problem even if you can afford it.
Skipping the service charge accounts. Three years of accounts plus planned major works: ask, in writing.
Buying a leasehold house without asking why. Usually there's no good answer.
Treating "share of freehold" as a magic word. The lease still has to be sound.

Sources: gov.uk: Leasehold Reform (Ground Rent) Act 2022 guidance · legislation.gov.uk: Leasehold and Freehold Reform Act 2024 · House of Commons Library, Leasehold reform in England and Wales: what's happening and when? (CBP-10653) · gov.uk: Draft Commonhold and Leasehold Reform Bill · LEASE: Section 20 consultation · gov.uk, Building safety leaseholder protections: guidance for leaseholders · legislation.gov.uk: Commonhold and Leasehold Reform Act 2002, s.167 · legislation.gov.uk: Rights of Re-entry and Forfeiture (Prescribed Sum and Period) (England) Regulations 2004

Education, not financial advice. For mortgage advice, speak to an FCA-authorised broker.

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