Leasehold

Leasehold is a form of property tenure, defined by gov.uk, in which you own the right to occupy a property for a fixed term, commonly between 99 and 999 years, while the land and building structure remain owned by a freeholder. When the lease expires, ownership reverts to the freeholder unless the leaseholder has extended the term or purchased the freehold. In England and Wales, leasehold is the standard tenure for flats, and it creates a continuing legal relationship between leaseholder and freeholder governed by the terms of the lease.

The individual holding a long lease is known as a leaseholder, a term with specific legal significance when it comes to service charge disputes and enfranchisement rights.

When buying a leasehold flat, the conveyancing process should review the lease term, ground rent, service charges and any restrictions on letting before exchange.

Leasehold vs freehold

Freehold ownership means owning both the building and the land beneath it outright, with no lease term and no superior landlord. Leasehold ownership gives you the right to occupy for a fixed period under a legal agreement with the freeholder. In practice, this distinction matters because leaseholders must comply with lease covenants, on alterations, subletting, pets, and use, and pay ongoing costs to the freeholder that freehold owners do not face. Houses are usually sold as freehold; flats are almost always sold as leasehold.

What does leasehold cost?

Leaseholders typically pay two categories of ongoing costs to the freeholder. Ground rent is an annual payment for occupying the land. The Leasehold Reform (Ground Rent) Act 2022 prohibits ground rent on most new residential leases in England and Wales, reducing it to a peppercorn, effectively zero, on all new regulated leases. Existing leases with active ground rent provisions remain subject to their terms.

Service charges cover the freeholder's costs of maintaining shared parts of the building: roofs, communal hallways, lifts, exterior decoration, and building insurance. The amount varies year to year based on works carried out. Leaseholders have rights to request a summary of costs and to challenge charges they consider unreasonable at the First-tier Tribunal (Property Chamber).

Service charges are one of the most common sources of dispute between leaseholders and freeholders, see our guide to the Leasehold and Freehold Reform Act 2024 for the new transparency rights introduced in 2024.

Lease length and expiry

Residential leases typically start at 99, 125, or 999 years. As the term falls, particularly below 80 years, the property becomes harder to mortgage and less attractive to buyers. Leaseholders have a statutory right to extend their lease under the Leasehold Reform, Housing and Urban Development Act 1993, provided they have owned the property for at least two years. The Leasehold and Freehold Reform Act 2024 extended the standard extension term to 990 years for both houses and flats, removing the two-year ownership qualifying period for new claims.

For a full walkthrough of what the 2024 legislation changed, on lease extensions, ground rent, and freehold purchase rights, see August's guide to the Leasehold and Freehold Reform Act 2024.

What leasehold means if you are a landlord

If you own a leasehold flat and let it on an assured tenancy, you occupy a dual position: you are a tenant of the freeholder under the headlease, and simultaneously a landlord to your residential tenant under the Renters' Rights Act. Where the lease structure involves a headlease sitting between the freeholder and the individual flat leases, a leaseholder who sublets becomes a mesne landlord with obligations running in both directions.

From working with self-managing landlords across the UK, the two-layer structure is where compliance gaps most commonly arise. Your residential tenant holds you responsible for property condition under the Homes (Fitness for Human Habitation) Act 2018 and, from 27 October 2025, Awaab's Law on damp and mould. But your ability to fix the root cause, a failed roof, failed communal heating, or structural damp, depends on the freeholder acting promptly. That dependency means leasehold landlords need to document maintenance requests to the freeholder and track their own compliance obligations separately.

All standard Renters' Rights Act duties apply when you let a leasehold flat: deposit protection, permitted payments, fit for human habitation standards, MEES compliance, and the PRS Ombudsman and PRS Database requirements. Landlords who hold a leasehold flat and let it on an assured tenancy should review August's compliance checklist feature for a complete overview of what applies.

You must also comply with the headlease covenants set by the freeholder. Many leases restrict subletting, require the freeholder's written consent before letting, or limit the type of tenancy permitted. Breaching these covenants can lead to enforcement action, and in extreme cases forfeiture of the lease.

From working with leasehold landlords who self-manage, the most consistent oversight we see is failing to notify the freeholder of a tenancy as required by the lease. Even where the freeholder appears inactive, the obligation to notify usually exists in the lease and the cost of ignoring it, if enforcement action follows, is far higher than the cost of a short letter.

The Leasehold and Freehold Reform Act 2024

The Leasehold and Freehold Reform Act 2024 made significant changes to leaseholder rights in England and Wales. The key changes for landlords who hold leasehold properties are: the standard lease extension term increased to 990 years; the two-year qualifying period for lease extensions and freehold purchase was removed; leaseholders in mixed-use buildings gained broader collective enfranchisement rights; and freeholders must now provide standardised service charge information. The Act does not abolish leasehold for existing flats, but it substantially improves leaseholders' negotiating position when extending leases or challenging charges.

Frequently asked questions

What is the difference between leasehold and freehold? 

Freehold ownership means you own the building and the land beneath it outright, with no fixed term and no superior landlord. Leasehold ownership means you own the right to occupy a property for a fixed term under a legal agreement with the freeholder, who retains ownership of the land. When the lease term expires, ownership returns to the freeholder unless you have extended or bought the freehold.

What happens when a leasehold expires? 

When a lease reaches zero years, the freeholder becomes entitled to take back possession of the property. In practice, most leaseholders extend their lease well before this point, and statutory rights under the Leasehold Reform, Housing and Urban Development Act 1993 (as amended by the Leasehold and Freehold Reform Act 2024) give qualifying leaseholders the right to extend to 990 years. Mortgage lenders typically require a minimum unexpired term, often 70–85 years, before they will lend against a leasehold property.

Can a leasehold landlord sublet their flat? 

Usually yes, but it depends on the terms of the headlease. Many leases require the freeholder's written consent before subletting and may prohibit certain tenancy types. Breaching a subletting restriction is a covenant breach that can result in enforcement action by the freeholder. Always check the lease before granting a tenancy, and notify the freeholder as required.

Do leaseholders still pay ground rent? 

For new regulated leases granted after 30 June 2022, ground rent is prohibited under the Leasehold Reform (Ground Rent) Act 2022 and must be set at a peppercorn, effectively zero. Existing leases with ground rent provisions continue to be subject to those terms, though the Act restricts freeholders from demanding ground rent above the peppercorn level on qualifying new leases.