Leasehold

Leasehold is a form of property ownership in which the leaseholder owns the right to use the property for the duration of their lease, but does not own the land it stands on. The land and ultimate ownership of the building rests with the freeholder.

Most flats in England and Wales are leasehold. Some houses (particularly new builds and some older houses that were converted) are also leasehold, though the Leasehold and Freehold Reform Act 2024 restricts new-build houses being sold as leasehold.

The leasehold interest is valuable for as long as significant lease term remains. A 125-year lease on a flat has substantial value. A 55-year lease is worth considerably less because of the difficulty in getting a mortgage and the complexity of selling to another buyer.

Key costs associated with leasehold ownership: ground rent (see ground rent), service charge (see service charge), and the cost of a lease extension if the term falls below acceptable levels.

For investors, leasehold flats can make good investments if: the lease is long (ideally 100+ years at purchase), the service charge is transparent and reasonable, the freeholder or management company is well-run, and the location and yield justify the additional complexity.