Leasehold vs Freehold in Luxury Property: Everything Buyers Need to Know

The Ownership Structures That Define London Property

If you are buying property in London, you will encounter two ownership structures: leasehold and freehold. The distinction is fundamental — it affects your rights, your costs, your control over the property, and its long-term value. Yet many buyers, particularly international purchasers unfamiliar with the English system, do not fully understand the differences until they are already committed. This guide explains everything clearly and honestly so you can make an informed decision.

What Is Freehold?

Freehold means you own the building and the land it sits on outright, with no time limit. You have complete control over the property, subject only to planning regulations and building codes. There is no ground rent, no service charge payable to a third party, and no lease that can expire. In the luxury market, freehold is the gold standard of ownership. A freehold house in Belgravia or Kensington is about as close to a permanent, appreciating asset as property can get. Most houses in London are sold freehold. Most apartments are not.

What Is Leasehold?

Leasehold means you own the right to occupy the property for a fixed period — the lease term. When the lease expires, ownership reverts to the freeholder. In practice, new leases are typically granted for 99, 125, or 999 years, so you may never face the actual expiry of your lease during your lifetime. But the remaining term matters enormously for value and mortgageability. A lease with 120 years remaining is far more valuable than one with 60 years remaining, even if the physical property is identical. You pay ground rent to the freeholder and service charges for building maintenance, and you are bound by the terms of the lease which may restrict alterations, subletting, and use.

The Critical Lease Length Thresholds

Three numbers matter when assessing a leasehold property. Below 80 years, the cost of a lease extension increases significantly because you must pay marriage value to the freeholder — a share of the uplift in property value that the extension creates. This can add tens or hundreds of thousands of pounds to the extension cost. Below 70 years, most mainstream mortgage lenders will refuse to lend, severely restricting your pool of potential buyers when you sell. Below 40 years, the property becomes extremely difficult to sell at a reasonable price and may only attract cash buyers at a significant discount. Our strong advice is to never buy a leasehold property with less than 80 years remaining unless you have factored in the full cost of a lease extension and negotiated the purchase price accordingly.

Share of Freehold: The Best of Both Worlds?

In many converted period buildings, the leaseholders collectively own the freehold through a management company. This structure — known as share of freehold — is highly desirable. It gives you the security of leasehold with collective control over the building. You and your fellow leaseholders decide on maintenance, service charges, and building management rather than a remote freeholder. Extending your lease is straightforward and inexpensive because you are effectively negotiating with yourself. Properties with share of freehold typically command a 5-10% premium over equivalent properties with a third-party freeholder.

Recent Leasehold Reforms

The UK government has introduced significant leasehold reforms in recent years. Ground rents on new leases have been capped at peppercorn (effectively zero). Proposals to abolish marriage value for lease extensions would dramatically reduce extension costs for leaseholders with shorter leases. The right to manage and collective enfranchisement rules have been strengthened, making it easier for leaseholders to take control of their buildings. These reforms are broadly positive for leasehold buyers, but they are being implemented in stages, and the full impact will take years to materialise. Your solicitor should advise on the current state of reform and how it affects the specific property you are considering.

For detailed guidance on the buying process, explore our Complete Guide to Buying Luxury Property in London which covers leasehold considerations alongside every other aspect of the transaction.

Frequently Asked Questions

Is it better to buy leasehold or freehold in London?

Freehold is always preferable if available, as it gives you outright ownership with no time limit, ground rent, or external management. However, most apartments in London are leasehold. For leasehold purchases, look for long leases (ideally 90+ years) and share of freehold where possible. Both structures can be excellent investments when the terms are right.

How much does a lease extension cost in London?

Lease extension costs vary enormously depending on the remaining term, property value, and ground rent. For a £1 million apartment with 80 years remaining, a typical extension cost is £20,000-£40,000. With 70 years remaining, costs rise to £50,000-£100,000 due to marriage value. Below 60 years, costs can exceed £150,000. Government reforms to abolish marriage value could significantly reduce these figures.