What Is a Leasehold Property?

You've probably heard of properties being described as 'freehold' or 'leasehold' but what do these terms actually mean? Today, we look at what do you will need to know if you are thinking about buying a leasehold property and also at lease extensions and the Ground Rent Scandal.

With a freehold purchase the buyer owns the home and the land it is built on.

Article updated: August 2026

With a leasehold purchase, the buyer owns the right to occupy the home for the term set by the lease, but not the land it sits on. If a lease expires, that does not automatically mean the occupier must leave, although their rights and legal protections are reduced and urgent specialist advice is needed.

How Long do Leases Last?

How long a lease will last will depend on several factors. Primarily, it will depend on what was agreed when the property was first sold but also the type of property it is, and where in the country it is located, can also have an impact.

Historically, leases have tended to be for 99 years but there are a lot of exceptions to this rule. For example, in Greater Manchester and Merseyside, terraced houses with 999-year leases and peppercorn ground rents are common. This is because the houses were built on old, large estates, where the respective landowners were unwilling to sell their land for the purpose of freehold housebuilding.

The leasehold system should really be understood as a relic of the colonial days, and while almost all of the former British Empire has abandoned it for other systems, it is still very much in play in England, Wales and (with some differences and idiosyncrasies) Northern Ireland. Scotland, however, has its own ownership system, where properties are either freehold or, effectively speaking, shared freehold.

When can a Property be Leasehold?

Flats and apartments, whether they are new builds, in converted buildings or above offices and shops, almost always are and have generally always been leasehold. In other words, if you are buying a flat, in all likelihood, you will be entering into a leasehold arrangement.

This is much less likely if you are buying a house, although, as per our example above (the terraces in Greater Manchester and Merseyside), it is far from impossible.

The Ground Rent Scandal

Unfortunately, over the last 15-20 years, we have seen some unscrupulous homebuilders and developers, exploit the system, in what has become known as the Ground Rent Scandal.

As we have seen above, houses are typically sold as freehold and flats as leasehold. This means that flat owners can have to pay ground rent to the landowner which in most cases is a very affordable charge and in some, is what is known as a peppercorn or peppercorn rent. (Peppercorn rent is a very small, nominal charge, that exists, historically, only to enforce the terms of the lease and keep it legally binding.)

So, what happened in the scandal is that some homebuilders and developers decided to flip the switch on these norms and started to sell houses as leaseholds while writing into those agreements, ground rents of, for example, £400 per year and as this wasn't bad enough, they were including provisions in their agreements that this amount would increase over time, say, doubling every 10 years.

There is a lot that could be said about this story (not least of all the efforts that were made to make sure home buyers didn't understand the detail of what they were signing are jaw-dropping). This Guardian explainer covers the background, but the short version is this: at least 100,000 people ended up trapped in properties, with spiralling ground rents, that they couldn't sell, exactly because of those spiralling ground rents.

The end result of all this? The Leasehold Reform (Ground Rent) Act 2022 limits ground rent to a peppercorn for most new long residential leases granted in England and Wales from 30 June 2022, subject to exceptions. It is not limited to new-build developments, and buying an existing lease after that date does not remove ground rent already required by that lease. Independent legal advice remains essential.

Advantages and Disadvantages for an Investor

As an investor, buying a leasehold can yield a couple of key advantages over a freehold.

The first is that buying a flat (especially in an apartment block) will generally be a more convenient, hands-off investment when compared to buying a house. This is because, while every block is different' they often come with facilities management, cleaning, gardening, maintenance and security.

While it is true that these services fall under a service agreement and are not covered by ground rent (which does not imply the provision of any services at all), you are unlikely to buy a property that comes with such services, without it being a leasehold.

The second concerns lease extension opportunities, which we shall go into more detail about in the next section of this article. In short, a lease that is coming to the end of its term can make a property unmortgageable, presenting cash-ready investors, who have knowledge of the lease extension process, with the opportunity to buy at a discount and sell at a profit.

However, there are a few disadvantages to leasehold properties as well and would-be investors should take note and always consult with a solicitor before purchasing.

The first is ground rent. Most qualifying new long residential leases are restricted to a peppercorn, but older and excepted leases can still require ground rent. Check the actual lease and do not assume that a recent purchase removes an existing charge.

Secondly, there can be extra conditions, connected to the lease. Pet ownership or rules around noise are two possible examples of this. Again, it is a case of knowing what you are agreeing to.

Thirdly, your rights to refurbish your apartment might be restricted by the terms of the lease, meaning that you would require a license to alter to engage in any refurbishment works.

And finally, you don't want to run into trouble regarding the length of the lease. A short lease can be difficult to mortgage or sell and can be expensive to extend. Expiry does not automatically mean the occupier must leave, but their rights and protections reduce, so a lease approaching its end requires urgent specialist advice.

Extending a Lease

Qualifying leaseholders in England and Wales may have a statutory right to extend a lease through the enfranchisement rules. The rules and qualifying conditions differ for flats and houses, and an informal extension can also be negotiated with the freeholder.

Under the statutory schemes currently in force, a qualifying flat lease can be extended by 90 years and a qualifying house lease by 50 years, according to the government's leasehold guidance. The former two-year ownership requirement was abolished on 31 January 2025, so a qualifying leaseholder can start a statutory extension or freehold-purchase claim immediately after buying.

On top of the 'security of ownership' a lease extension can bring, it can also enhance the value of a property by making it easier to get a mortgage on and an extension may also mean that ground rent is cancelled, bringing down costs.

As mentioned already some property investors will buy short-leasehold properties with a view to extending the lease, meaning they can sell at profit but this is not a strategy for beginners in this market.

The Leasehold Extension Process, Explained

The Leasehold Advisory Service or LEASE should be the first place to go to when considering extending a lease. They are an official public body who provides free initial advice to residential leaseholders.

You'll need a solicitor who specialises in leasehold extension. The Law Society's Find a Solicitor tool can help you find one - search the 'Houses, Property and Neighbours' tab. There is no fixed scale of charges, so ask for estimates first.

It is also advisable to obtain a professional valuation to establish a reasonable cost for the extension. You'll need a surveyor experienced in these kinds of valuations. The RICS Find a Surveyor tool can help here.

A lease can be extended informally on terms agreed with the freeholder or through a qualifying statutory claim. Flat claims follow the Leasehold Reform, Housing and Urban Development Act 1993, while house claims follow the Leasehold Reform Act 1967, so there is not one universal notice or process. A specialist solicitor and valuer should confirm eligibility, serve the correct notice and calculate the premium under the applicable statutory valuation rules; disputed terms or price can be referred to a tribunal.

You may also have to pay what is known as marriage value if the lease has under 80 years remaining. Marriage value means that as well as the cost of the leasehold extension you will be expected to pay 50% of the adjusted amount or potential profit that the leasehold extension adds to the value of the property.

The Leasehold Reform, Housing and Urban Development Act 1993 stipulates how marriage value should be calculated, and that it should be shared equally between the leaseholder and freeholder. The Leasehold Advisory Service explains how it is calculated according to the law in its marriage value glossary entry.

The Leasehold and Freehold Reform Act 2024 contains future changes including 990-year statutory extensions and the abolition of marriage value, but those valuation and extension reforms are not yet in force. The government's current implementation explainer says further legislation and implementation work are still required, so the current 50-year and 90-year terms and current marriage-value rules continue to matter for claims made now.

Summing Up

It's clear that buying or investing in a leasehold property involves many more considerations than buying a freehold property. So always be sure to ask your conveyancer or solicitor to explain the terms of the lease to you in detail.

That said, there is no reason why a leasehold property shouldn't make a perfectly good property investment - as long as you know exactly what conditions and costs the lease involves and that all the numbers still stack up.

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