Leasehold and freehold explained for London buyers: what each tenure means, what a lease costs, how reform is changing the rules and what to check first.

By Aldo Attanasio d’Aponte – September 9, 2026

Leasehold vs freehold: what a London buyer actually owns

A freehold is the land and the building, yours for as long as you like. A leasehold is the right to occupy a property for a fixed number of years, on terms set out in a document written by someone else. Most London houses are freehold and most London flats are leasehold, so if you are buying an apartment in Mayfair or Kensington you will almost certainly be buying a lease. That is not a reason to worry. It is a reason to read it.

What does leasehold mean in practice?

When you buy a leasehold flat you are buying a lease, which is a long tenancy. It has a start date, a term (commonly 99, 125 or 999 years when first granted) and a freeholder who owns the building and the ground it stands on. The lease sets out what you may and may not do with the flat, what you must pay towards the building, and who is responsible for what.

The recurring costs are the service charge, which is your share of insuring, cleaning, repairing and running the building, and in older leases a ground rent paid to the freeholder for nothing in particular. New residential leases granted since mid-2022 can only carry a peppercorn ground rent, which means nil. Older leases may still charge a few hundred pounds a year, or occasionally a sum that doubles on a schedule, and those escalating rents are the ones to be wary of.

The lease will also contain covenants. Typically you need the freeholder’s consent to alter the flat structurally, you may be prevented from letting it short-term, and there may be rules on pets, flooring and noise. In a well-drafted lease these are sensible protections for everyone in the building. In a badly drafted one they are a source of expense and friction.

What does freehold mean in practice?

Freehold is simpler. You own the property outright, indefinitely, with no landlord above you. There is no service charge and no ground rent, and no one to ask before you knock through a wall, although planning law, listed building rules and conservation area controls still apply, and in prime central London they apply with some force.

The price of that independence is that every cost is yours. Roof, drains, insurance, the crack in the rear elevation: there is no managing agent to call and no reserve fund to draw on. For a house in Belgravia or Chelsea that may run to serious money over a decade, and a buyer should budget for it rather than assume a freehold is a maintenance-free asset.

Which matters more, the tenure or the terms?

I have watched buyers reject excellent flats because they were “only leasehold” and then buy a mediocre one because it happened to have 950 years left. The tenure label tells you very little. The terms tell you everything.

The three things that move value are the number of years remaining, the level and history of the service charge, and the quality of the building’s management. A flat with 120 years, a well-run residents’ company and a healthy reserve fund is a straightforward purchase. A flat with 74 years, a freeholder who never answers letters and a £400,000 roof project on the horizon is a negotiation, and possibly a walk-away.

Lease length deserves particular attention. Below roughly 80 years a lease becomes harder to mortgage and, under the valuation rules that have applied for decades, considerably more expensive to extend, because the freeholder is entitled to a share of the uplift in value (what the law calls marriage value). Reform legislation passed in 2024 is intended to remove marriage value from the calculation and to allow 990-year extensions at a peppercorn rent, and the requirement to have owned a flat for two years before claiming an extension has already gone. Not every provision is yet in force, so a buyer should take advice on the law as it stands on the day they exchange, not on the law as announced.

What about share of freehold?

In many period conversions in Kensington, Notting Hill and Chelsea, the flat owners jointly own the freehold, usually through a small company in which each has a share. You still hold your flat on a lease, but the landlord is you and your neighbours.

The advantages are real. Lease extensions can be granted between the co-owners for nominal cost, management decisions are taken by the people who live there, and there is no external freeholder looking to profit from the building. The disadvantage is that you are in business with your neighbours. Four flats and one owner who will not pay for the roof is a familiar London story. Ask to see the company’s accounts, the minutes of recent meetings and the state of the reserve fund before you commit.

What is commonhold, and should I wait for it?

Commonhold is a tenure in which each flat is owned outright, with no lease and no expiry, and the common parts are owned by an association of the flat owners. It has existed in England and Wales for two decades and almost nobody has used it. The government has published draft legislation to make it the default tenure for new flats and to make conversion of existing buildings easier, with a final bill expected to follow.

Should you wait? No. The reforms will take years to work through, existing leases will remain leases for a long time, and a good flat on a good lease is not made worse by the existence of a better system on paper.

What should a leasehold buyer check before exchange?

Your solicitor will report on the lease, but the questions worth asking early, before you spend money on lawyers and surveyors, are these:

• Years remaining on the lease, and the likely cost of extending it.
• The current service charge, the last three years’ accounts, and the balance of the reserve fund.
• Any planned major works and who has been told about them.
• Ground rent, and whether it reviews or escalates.
• Restrictions on alterations, subletting, short lets and pets.
• Who manages the building, and whether there are live disputes.
• Whether the building has any cladding or fire-safety history.

If the answers are unsatisfactory, that is either a price reduction or a reason to look elsewhere. Both are acceptable outcomes. Paying full price for a poor lease is not.

Is freehold always the better buy?

For a house, the question does not arise. For a flat, a long lease in a well-run building will often suit an international buyer better than a freehold house, because someone else insures the structure, maintains the fabric and answers the door when the buyer is in Milan or New York for four months. Prime London houses also cost more per square foot to buy and to run, and they rarely come with a porter.

The useful question is not “leasehold or freehold” but whether the tenure, the running costs and the restrictions of this particular property fit the way you intend to use it and the length of time you intend to hold it.

Rates and figures correct at the time of writing; confirm the current position before relying on them.

How Arbitrage can help

We act only for buyers, and reading leases with a sceptical eye is a large part of what we do before a client ever instructs a solicitor. Over twenty years and more than 500 homes acquired for private clients, we have learned which buildings are well run and which are not, and we price the lease into the offer rather than discovering its problems after exchange. If you are weighing a leasehold flat against a freehold house, we can tell you quickly which is the better use of your money.

Frequently asked questions

Is a leasehold flat a bad investment in London?

No. The great majority of prime London flats are leasehold and many are excellent purchases. Value is determined by the length of the lease, the running costs and the management of the building, not by the tenure label itself.

How many years should be left on a lease when I buy?

There is no magic number, but treat anything under 90 years as a point to negotiate and anything under 80 as a specialist purchase. The cost of extending should be estimated before you offer and deducted from the price.

Can I extend a lease as soon as I buy?

Yes. The old rule requiring two years’ ownership before a statutory extension claim has been removed, so a buyer can begin the process immediately after completion, or in some cases have the seller start it and assign the claim.

Does share of freehold mean there is no lease?

No. You still hold your flat on a lease, but the freehold is owned collectively by the flat owners, which gives you control over management and makes lease extensions inexpensive.

What is the difference between service charge and ground rent?

Service charge pays for the running of the building and should reflect actual costs. Ground rent is a payment to the freeholder for nothing in return; it is nil on new leases and is the subject of proposed caps on older ones.