Understand the fundamental differences between leasehold and freehold property in the UK, the advantages of each tenure, and when converting from leasehold to freehold makes financial sense.
When you buy property in England and Wales, you are buying either a freehold or leasehold interest. Freehold means you own the property and land outright and indefinitely. Leasehold means you own the right to occupy for a fixed number of years — a term that shrinks every year you own the property.
No ground rent, no lease expiry risk, no need to ask permission for most alterations, and no service charge obligations (unless on a managed estate). Freehold is the gold standard of UK property ownership and is the most common tenure for houses.
A property with a 60-year lease can be worth 8–15% less than the equivalent freehold, and many lenders refuse mortgages on properties with fewer than 70 years remaining at the end of the mortgage term.
A leasehold property loses value as the lease shortens. A flat worth £300,000 with a 90-year lease may be worth only £278,000 with 70 years remaining. At 60 years, it may be difficult to mortgage at all. The impact becomes dramatic below 80 years when marriage value applies.
Where each flat owner holds a share in the company that owns the building's freehold, this eliminates the adversarial freeholder relationship, gives control over service charges, and allows in-house lease extensions at minimal cost. Highly desirable and usually achieved through collective enfranchisement.
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