Quick take: If you are buying a flat in England or Wales, you are almost certainly buying a leasehold. This means you do not own the building. You own the right to live there for a fixed period, subject to rules you did not write. Understanding leasehold before you commit can prevent expensive mistakes.

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How Leasehold Works

When you buy a freehold property, you own the building and the land. When you buy a leasehold flat, you are buying a long tenancy. A freeholder (sometimes a company, sometimes a private individual) owns the building and the land. Your lease says how long you can stay, what you must pay, and what rules you must follow.

Think of it like this: freehold means you own the book. Leasehold means you have an extremely long library loan with conditions attached.

1. Lease Length Matters More Than You Think

A new lease might start at 999 or 125 years. That sounds like plenty. But many flats on the market have leases that have been ticking down for decades. Here is where it gets expensive:

• Below 80 years: Extension costs increase dramatically because of "marriage value"--you must pay the freeholder 50% of the increase in value that the extension creates

• Below 70 years: Most mortgage lenders will refuse to lend

• Below 60 years: The flat becomes very difficult to sell at all

A first-time buyer in Croydon bought a flat with 72 years remaining. She assumed she could extend the lease after moving in. She could, but the cost was over 15,000 pounds, on top of solicitor and valuation fees. Nobody mentioned this before she exchanged. The information was in the title register.

2. Ground Rent

Ground rent is an annual payment to the freeholder. Historically this was a token amount (10 to 50 pounds). Some newer leases, particularly those from the mid-2000s to 2017, include escalating ground rents that double every 10 or 25 years.

The Leasehold Reform (Ground Rent) Act 2022 caps ground rent at a "peppercorn" (effectively zero) for new leases granted after 30 June 2022. But this does not help if you are buying an existing flat with a pre-2022 lease. If the ground rent exceeds 250 pounds per year (or 1,000 pounds in London), the lease may technically qualify as an "assured shorthold tenancy", which means the freeholder could seek possession. Most lenders will not touch these.

3. Service Charges

You will pay a service charge for the upkeep of communal areas, building insurance, and the managing agent's fees. The amount varies enormously:

• A small conversion with four flats and a hands-off freeholder might charge 500 to 800 pounds per year

• A purpose-built block with a lift, concierge, or communal gardens can charge 2,000 to 5,000 pounds or more

Ask to see three years of service charge accounts before making an offer. Look for "major works" contributions--these are one-off charges for big repairs (new roof, external decoration) that can run to thousands per flat with little notice.

4. What the Lease Restricts

Your lease will contain restrictions. Common ones include:

• No subletting (or only with the freeholder's consent)

• No pets (or only with written permission)

• No alterations without consent (sometimes including internal changes like removing a wall)

• No running a business from the property

Breaching these terms can give the freeholder grounds to forfeit the lease. In practice this is rare, but it has happened.

5. Buying the Freehold

If you and enough other leaseholders agree, you may be able to collectively buy the freehold through "collective enfranchisement". This requires at least 50% of qualifying leaseholders to participate. It is not simple or cheap, but it gives you control over the building and removes ground rent obligations.

FAQ

Can I check the lease length before viewing a property?

Yes. Estate agents should disclose the remaining lease term in their listing. You can also check the title register from HM Land Registry for 3 pounds online.

Is leasehold reform happening?

The Leasehold and Freehold Reform Act 2024 received Royal Assent, but many provisions require secondary legislation to take effect. Planned changes include making lease extensions cheaper and easier, and increasing transparency around service charges. Check GOV.UK for implementation updates.

Can AI tools help me understand a lease?

Yes. Tools like Unwildered can flag key terms in the lease document: remaining term, ground rent escalation, restrictions, and service charge provisions. You upload the lease as a PDF or Word document and receive a plain-English summary. It is a useful first step before engaging a solicitor.

Disclaimer: This article is general information, not financial, tax, or legal advice.