Leasehold or freehold: what a flat really costs compared with a house
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Picture two properties in the same town at the same asking price: a two-bedroom flat and a two-bedroom terraced house. On paper they look like a straight swap. In practice they are two quite different financial commitments, because in England and Wales most flats are sold leasehold and most houses are sold freehold, and the gap between those two words can add up to thousands of pounds over the years that you own the property.
The distinction is simple enough. Buy a freehold property and you own the building and the land it stands on outright. Buy a leasehold property and you own the right to live there for the length of a lease, often 99, 125 or 999 years, while a freeholder keeps ownership of the land and, usually, the building itself. That structure suits blocks of flats, where someone has to look after the roof, the lift and the communal hallway. It also brings costs and conditions that a freehold house simply does not have.
The costs that come with a lease
The headline price of a leasehold flat is often lower than a comparable house, which is part of its appeal to first-time buyers. The ongoing costs deserve just as much attention. Service charges pay for the upkeep of shared areas and the building itself, and they can rise noticeably from year to year, particularly if major works such as a new roof or cladding remediation land on the horizon. Ground rent may also be payable to the freeholder on older leases, though it has been banned on most new residential leases granted since 30 June 2022. On top of that, many leases carry rules on subletting, pets, alterations and even flooring, so the small print shapes how you live as well as what you pay.
Take Priya, aged 29, a first-time buyer whose dilemma will feel familiar. She is choosing between a flat at around £180,000 and a small terrace at around £200,000. The flat looks cheaper, but it comes with a service charge of roughly £2,000 a year and a lease with 85 years left to run. The house has no service charge, but every repair, from the boiler to the gutters, would be hers alone to arrange and pay for. Neither option is wrong. The point is that the true cost of each only shows up once you look past the asking price.
Why the lease length matters
A shrinking lease quietly eats into a flat's value. Once the term drops towards 80 years, extending it becomes markedly more expensive under the current rules, and many mortgage lenders grow wary of short leases, which can make the flat harder to sell or remortgage. Extending a lease means legal fees, valuation fees and a premium to the freeholder, so the remaining term should be one of the first questions you ask about any flat, not an afterthought once you have fallen for the kitchen.
Leaseholders do have rights, including the right to extend the lease, to club together with neighbours to buy the freehold, or to take over the management of the building. These routes exist and can work well, but they take time, cooperation and money, so it pays to understand them before you buy rather than discover them in a dispute.
A system in the middle of reform
Leasehold law is changing, and it is worth knowing the direction of travel. The Leasehold and Freehold Reform Act 2024 is on the statute book but most of it is not yet in force, although one early change means buyers no longer need to have owned a flat for two years before applying to extend the lease. In January 2026 the government also announced plans, through a draft Commonhold and Leasehold Reform Bill, to cap ground rents on existing leases at £250 a year and phase them out over time, though this is not yet law and is not expected to take effect before 2028. Reform may improve the position of leaseholders, but buying today still means buying under today's rules, and nothing announced is guaranteed to pass in its current form.
Freehold, for its part, is not a free lunch. You carry every maintenance cost and every insurance decision yourself, and some modern freehold estates charge their own estate management fees for shared roads and green spaces. Whichever route you take, a good conveyancer and a mortgage adviser who has seen the pitfalls before are worth their weight.
In summary
Leasehold flats and freehold houses can both be sound purchases, but they are not the same commitment dressed in different clothes. A flat's lower price often comes with service charges, lease conditions and the cost of keeping the lease long enough to stay mortgageable, while a house hands you the full bill for its own upkeep. Understanding those trade-offs before you offer, rather than after you complete, is what makes the difference.
If you are weighing up a leasehold flat against a freehold house, or trying to make sense of a lease before you commit, get in touch with us at ACJ. We would be glad to talk through the mortgage side and help you see the full picture before you sign anything.