Leasehold means you have the right to occupy and use a property for a set number of years, as specified in the lease. The land and the building's structure are owned by the freeholder (also called the landlord). When the lease expires, ownership reverts to the freeholder unless you extend it.
Leasehold is the most common form of ownership for flats and apartments in England and Wales. Some houses — particularly new-build estates — have also been sold as leasehold, though recent government reforms aim to end this practice.
The lease is a legal document that sets out the terms of your ownership, including ground rent, service charges, maintenance responsibilities and any restrictions (such as keeping pets or making alterations). As a leaseholder, you are legally bound by these terms.
Lease length is critical for mortgage purposes. Most lenders require a minimum remaining lease term — typically at least 70 to 80 years at the time of application, or enough years remaining at the end of the mortgage term (usually 30 to 40 years). Short leases can make a property difficult or impossible to mortgage and can significantly reduce its market value. Extending a lease is possible but can be expensive.
Omar buys a two-bedroom flat with a 95-year lease for £240,000. He pays annual ground rent of £250 and a monthly service charge of £150 covering building insurance, communal cleaning and maintenance. His mortgage lender is satisfied with the lease length. In 20 years, when the lease is down to 75 years, Omar plans to extend it before it drops below the level where mortgage lenders become reluctant to lend.
Key Points
- Leasehold gives you the right to occupy a property for a fixed number of years
- The freeholder owns the land and building structure
- Most flats are leasehold; most houses are freehold
- Mortgage lenders typically require at least 70–80 years remaining on the lease
- Lease extensions are possible but can be costly — acting before the lease drops below 80 years is advisable