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What is Leasehold? A Comprehensive Guide

Updated: Sep 17, 2023


 
A house with a tree

Leasehold is a form of property ownership in which the property is owned for a fixed period of time, but the land on which it stands is not. Instead, the land is owned by a separate entity, known as the freeholder, who grants a lease to the owner of the property for a set period, usually 99 or 125 years.


Leasehold ownership gives you the right to occupy the property for the length of the lease. However, the ownership of the land remains with the freeholder, who grants you the lease in return for a ground rent payment. The ground rent payment is a nominal sum paid annually or bi-annually to the freeholder.


Leasehold ownership has become a contentious issue in recent years, particularly in the case of new build properties. In some cases, developers have included onerous ground rent clauses in the lease, which can escalate over time, making it difficult for leaseholders to sell their properties.



Leasehold vs Freehold


The main difference between leasehold and freehold is ownership. With freehold ownership, you own both the property and the land it stands on. You are responsible for maintaining the property and any repairs that need to be carried out. With leasehold ownership, you only own the property for a fixed period, and the responsibility for maintaining the property and the land it stands on usually falls to the freeholder.


If you are unsure about your property ownership, at Land Registry Online, we offer a Title Register service that allows you to easily obtain this information. Simply select the desired documents, complete your details, and you will receive your documents by email within a few hours.



Rights and Responsibilities


As a leaseholder, you have the right to occupy the property for the length of the lease. You are also entitled to challenge any service charges or ground rent payments that you believe to be excessive. You are responsible for maintaining the property in good condition and keeping it in a reasonable state of repair.


The freeholder is responsible for maintaining the land the property stands on, and any communal areas. They are also responsible for arranging buildings insurance for the property, which is usually recovered through service charges paid by the leaseholders.



Lease Extensions and Enfranchisement


If you own a leasehold property, you may be able to extend the lease, provided you have owned the property for at least two years. The process for extending the lease can be complex, and it is recommended that you seek professional advice.


If you own a leasehold flat, you may be able to buy the freehold collectively with the other leaseholders in the building. This process is known as enfranchisement and can be a complex and costly process.



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