Freeholder vs leaseholder: who owns what and who pays for what

A freeholder owns a building and the land it stands on with no end date. A leaseholder owns the right to occupy part of that building, usually a flat, for a fixed number of years under a lease granted by the freeholder. The lease sets out who repairs, who insures, what the leaseholder pays and what they need permission to do, and statute adds rights the lease cannot take away. This guide sets out the split for England and Wales as it stands in November 2026, and what it means if you own a leasehold flat and let it out.

The main differences at a glance

• Ownership: the freeholder owns the building and land indefinitely. The leaseholder owns a lease for a set term, often 99, 125 or 999 years, after which the flat returns to the freeholder unless the lease is extended.

• Repairs: the freeholder usually repairs the structure, roof, exterior and common parts. The leaseholder repairs the inside of their flat.

• Insurance: the freeholder usually insures the whole building and recovers the premium from the leaseholders. The leaseholder insures their own contents.

• Payments: the leaseholder pays a service charge towards running the building, and ground rent if the lease requires it.

• Permission: the leaseholder often needs the freeholder’s consent to alter the flat, sublet it or keep pets, depending on the lease.

• Control: the freeholder, or its managing agent, runs the building unless the leaseholders take over management or buy the freehold.

What a freeholder owns and is responsible for

A freeholder owns the land and the building outright and is bound by the covenants it gave in each lease. In a typical block, those covenants require the freeholder to keep the structure, roof, foundations, exterior and common parts in repair, insure the building, and manage shared services such as communal cleaning, lighting and lifts.

The freeholder recovers those costs through the service charge, but only to the extent they are reasonably incurred, and it must consult leaseholders before major works that would cost any one of them more than £250. In return, the freeholder can collect ground rent where the lease allows it, charge reasonable fees for consents, and enforce the lease, including, as a last resort and subject to strict statutory limits, through forfeiture.

If the freeholder decides to sell, most leaseholders of flats have a right of first refusal under Part 1 of the Landlord and Tenant Act 1987, so the building has to be offered to them before an outside buyer.

What a leaseholder owns and is responsible for

A leaseholder owns a lease, which is a legal interest in the flat that can be sold, mortgaged and passed on, for the remaining length of its term. What the leaseholder owns physically depends on the lease plan, but it usually covers the inside of the flat, including internal walls, floors and ceilings, while the structure and outside walls stay with the freeholder.

The leaseholder pays the service charge and any ground rent, keeps the flat in repair, and complies with the lease covenants, which commonly cover alterations, subletting, nuisance and pets. Breaching a covenant does not end the lease automatically, but it gives the freeholder grounds to take action.

Lease length matters more than most buyers realise. Below 80 years remaining, the cost of extending a flat lease rises because the freeholder can claim a share of the “marriage value” the extension creates, and many lenders become reluctant below about 70 years. The Leasehold and Freehold Reform Act 2024 provides for marriage value to be abolished, but that change is not yet in force in November 2026. When you sell, the buyer’s solicitor checks the lease terms and the building’s finances through the leasehold management pack.

Who pays for repairs: freeholder or leaseholder?

The freeholder usually carries out repairs to the structure, roof, exterior and common parts, and the leaseholders pay for them through the service charge. The leaseholder repairs and pays for everything inside their own flat, from plaster and flooring to their own boiler and fixtures. The lease is the final word, so check its repairing covenants and the lease plan before assuming who is liable for a particular item such as windows, which some leases give to the leaseholder.

In practice, most disputes are about cost rather than responsibility. A leaseholder who thinks a repair bill is unreasonable can ask the First-tier Tribunal (Property Chamber) in England, or the Leasehold Valuation Tribunal in Wales, to decide how much is payable.

Ground rent and service charges

Ground rent is a payment for the land itself, and the service charge is a share of what the building actually costs to run. The two are separate. Under the Leasehold Reform (Ground Rent) Act 2022, most new long residential leases granted on or after 30 June 2022 carry a peppercorn ground rent, meaning nothing can be charged. Older leases keep whatever ground rent they set, including some that double at intervals, which can make a flat harder to sell or mortgage.

Service charges have no such cap, and they have risen sharply in recent years, so the size of the charge and the state of the building’s reserve fund matter as much as the ground rent when you weigh up a leasehold flat.

Rights a leaseholder holds against the freeholder

Statute gives leaseholders a set of rights that sit above the lease and cannot be contracted out of. The main ones in England and Wales are these.

• Extending the lease: a qualifying leaseholder of a flat can claim a 90-year extension at a peppercorn ground rent. Since 31 January 2025, leaseholders no longer need to have owned the flat for two years first.

• Buying the freehold together: qualifying leaseholders in a block can buy the freehold through collective enfranchisement.

• Taking over management: leaseholders can take over the running of the building, without buying it, through the right to manage.

• Challenging charges: leaseholders can ask the tribunal to decide whether a service charge or administration charge is reasonable and payable.

• Information: leaseholders can ask for the freeholder’s name and address and a summary of the costs behind the service charge.

Our guide to the Leasehold and Freehold Reform Act 2024 explains which of the newer reforms are already in force and which are still waiting for regulations.

When you are both: share of freehold and commonhold

Some flat owners are leaseholders and freeholders at the same time. In a share of freehold, the leaseholders jointly own the freehold, usually through a company, so they control the building and can grant themselves longer leases, while each still holds an individual lease of their own flat. Commonhold goes further and removes the lease altogether, with each owner holding their flat outright and a commonhold association running the shared parts. Commonhold is still rare, but the government intends it to replace leasehold for new flats.

Freeholder, leaseholder and tenant: when you let a leasehold flat

If you own a leasehold flat and rent it out, there are three parties, not two. You are the leaseholder to your freeholder and the landlord to your tenant, and the two relationships run on different rules. Your tenant has no direct relationship with the freeholder, which is why August’s entry on the leaseholder explains how the two roles differ.

That gap is where problems start. Under section 11 of the Landlord and Tenant Act 1985, you must keep the structure and exterior of the home in repair for your tenant, even though your lease leaves those repairs to the freeholder. If the roof leaks, your tenant can hold you responsible while you wait for the freeholder to act. From working with self-managing landlords across the UK, we find that the leaseholder-landlords who handle this best report problems to the freeholder in writing straight away and keep a dated record of every chase.

Check your lease before you let. Many leases require the freeholder’s consent to sublet, a copy of each tenancy agreement, or a minimum tenancy length, and some ban short lets altogether. Landlords using August often tell us the lease is the one document they cannot find when a question comes up, which is why we suggest keeping it, the tenancy agreement and every freeholder notice together in one document store per property. Ground rent and service charge are generally allowable expenses against your rental income, so logging them as recurring costs in August’s expense tracking keeps them in your tax records without extra work.

Leasehold in Scotland

Scotland has no long residential leasehold system like England and Wales. Flat owners in Scotland own their flats outright, and shared repairs in a tenement are shared between the owners under their title deeds or the Tenements (Scotland) Act 2004, often organised through a property factor. Our guide for Scottish landlords covers how letting works there.

Frequently asked questions

Is a freeholder the same as a landlord?

Yes, in leasehold law the freeholder is the leaseholder’s landlord, and leases and statutes often call the freeholder “the landlord”. That can be confusing when a leaseholder also lets the flat, because the leaseholder is then the landlord to their own tenant.

Can a leaseholder become the freeholder?

Yes. Leaseholders of flats can buy the freehold of their building together through collective enfranchisement, or accept the freehold if the freeholder offers it under their right of first refusal. The owner of a leasehold house can usually buy the freehold of the house on their own.

Who pays the buildings insurance on a leasehold flat?

The freeholder normally arranges buildings insurance for the whole block and recovers the premium from leaseholders through the service charge. The leaseholder insures their own contents, and a leaseholder who lets the flat also needs landlord insurance for their own liabilities.

Do I need the freeholder’s permission to rent out my flat?

It depends on the lease. Many leases allow subletting of the whole flat but require you to notify the freeholder or obtain consent first, and some set conditions such as a minimum tenancy term. Read the subletting covenant before you advertise, because letting in breach of the lease puts you at risk of action by the freeholder.