Leasehold vs freehold
With freehold, you own the property and the land it sits on outright. With leasehold, you own the right to occupy the property for a fixed number of years under a lease, while a freeholder (or landlord) retains ownership of the building and land. Most flats in England and Wales are leasehold; some houses are too.
The lease is a long, detailed contract. It sets out what you can and can't do, who maintains what, and what you pay. Reading it — properly — is the single most important step in buying a leasehold home.
Ground rent and service charges
Ground rent is a periodic payment to the freeholder. Historically nominal, some modern leases contained doubling clauses that escalated rent to ruinous levels — a major scandal that reforms have since targeted. The Leasehold Reform (Ground Rent) Act 2022 reduced ground rent on most new long residential leases to a peppercorn (effectively zero), but older leases can still carry significant or escalating rents.
Service charges cover the cost of maintaining shared parts of a building — cleaning, insurance, repairs, and contributions to a reserve fund. They're variable and can rise sharply, especially where major works (a new roof, cladding remediation) are needed. Ask for the last three years of service-charge accounts and any planned major works.
The short-lease problem
A lease is a wasting asset: the fewer years left, the less it's worth and the harder it is to mortgage. Once the unexpired term drops below about 80 years, the cost of extending rises steeply because of 'marriage value', and many lenders become reluctant. Below roughly 70 years, financing options narrow further.
If a property has a short lease, factor the cost of a statutory lease extension into your offer — it can run to many thousands of pounds. Sometimes it's worth asking the seller to start the extension before completion so you inherit the benefit.
Questions to ask before you offer
Key questions: How many years are left on the lease? What is the ground rent, and does it escalate? What were service charges over the last three years, and are major works planned? Is there a managing agent, and is the building well run? For post-2000 blocks, what is the cladding and building-safety (EWS1) position?
The lease term, ground rent and any sale restrictions sit on the title and in the lease itself. A TrueBrick Plus report reads the title register back in plain English, including leasehold particulars, so you can spot a short lease or onerous terms before you're committed.
Frequently asked questions
What's a good number of years left on a lease?
Generally 90+ years is comfortable; 80 years is the threshold where extension costs jump because of marriage value. Anything materially below 80 needs careful costing before you offer.
Can I extend a lease, and when?
Yes. Under current rules you typically gain the statutory right to extend after owning the flat for two years, though reforms are changing qualifying periods and terms. A seller who already qualifies can sometimes serve notice and assign it to you.
Should I buy a leasehold house?
Be cautious. Leasehold houses have attracted particular criticism, and reforms aim to curb new ones. Check the ground rent, any escalation, and whether you can buy the freehold — and take legal advice.