Freehold, Leasehold and Share of Freehold: What UK Flat Buyers Need to Know

The Short Answer

A freehold house normally means you own the building and the land it stands on. A leasehold flat means you own a lease for a set term, granted by a freeholder who owns the building. A share of freehold flat is usually leasehold, but the freehold is owned jointly by the flat owners through a company, so the flat owners control the building.

For a flat buyer, the key questions are how many years are left on the lease, what you pay each year, who manages the building, and what the lease allows. A solicitor should check all of these before you commit.

Freehold

Freehold is common for houses. You own the property outright with no fixed end date, and you are responsible for maintaining it. Flats are rarely sold freehold in the same way, because the building has shared structure, roof and common parts that need joint management.

Leasehold

With a leasehold flat, the lease sets out your rights and duties. Typical terms include how long the lease runs, what service charge you pay for the upkeep of the building, whether there is a ground rent, and rules about alterations, pets, subletting and short lets.

• Lease length. The number of years remaining on the lease affects value and borrowing. A short lease can be expensive to extend, and many lenders will not lend on a flat with a short remaining term. Ask your solicitor and your lender what they require.
• Ground rent. Older leases may carry a ground rent, sometimes with increases built in. For most new long residential leases granted after the Leasehold Reform (Ground Rent) Act 2022 came into force, ground rent is limited to a peppercorn, meaning effectively nothing. Check which rules apply to the lease you are buying.
• Service charge and sinking fund. You contribute to the cost of managing and maintaining the building. Ask for recent accounts, the budget for the coming year, and details of any planned major works.
• Management. Find out who the freeholder and managing agent are, and how responsive they are.

Leasehold law has been changing. Our guides to leasehold reform for overseas buyers and to leasehold service charge transparency rules explain recent developments, and you should confirm the current position with your solicitor.

Share of Freehold

In a share of freehold building, the flat owners together own the freehold, usually through a company in which each owner holds a share. You still hold a lease on your own flat, often a long one, but the owners control decisions about the building and can usually agree to extend leases without paying a third-party freeholder.

• Advantages. Greater control over management and costs, and often fewer disputes with an outside landlord.
• Responsibilities. The owners are collectively responsible for repairs, insurance and compliance. If the owners do not manage the building well, you carry a share of the consequences.
• Checks. Ask for the company accounts, the minutes of owners' meetings, the reserve fund and any disputes. Confirm that your lease and your share are both transferred when you buy.

Commonhold: A Rare Alternative

Commonhold is a different legal structure in which each unit owner owns their unit freehold and shares ownership of the common parts through a company. It has been uncommon in England and Wales, so you are unlikely to meet it, but you should know it exists if a seller describes a property this way.

What to Ask Before You Exchange Contracts

• How many years are left on the lease, and what is the cost and process to extend it?
• What are the current ground rent and service charge, and how have they changed in recent years?
• Is there any major work planned, and who will pay for it?
• Who owns the freehold, and who manages the building?
• Does the lease restrict letting the flat, including short lets?
• For a share of freehold: how is the company run, and does it have a reserve fund?
• Will my lender accept this lease and this building?

Your conveyancing solicitor will request the lease, a seller's information pack and management accounts. Our overseas buyer's conveyancing timeline shows where these checks sit, and our guide to UK property searches covers the other enquiries a solicitor makes.

Why It Matters to Overseas Buyers and Landlords

Overseas buyers often rely on the building being well managed, because they are not there to deal with problems. Service charges are a recurring cost that affects your net rent, and a restrictive lease can limit how you let the flat. Compare flats on full running costs, not on price alone.

Why Choose Banke Properties?

Banke Properties helps overseas buyers and investors understand tenure, running costs and risks before they commit. We do not give legal advice, and we recommend that you instruct an independent UK solicitor for every purchase. To discuss a specific property, contact the Banke Properties team.

Conclusion

Before you fall for a flat, find out what you are actually buying. Check the tenure, the length of the lease, the charges and who runs the building, and have a solicitor confirm each point.

This article is general information, not legal, tax or financial advice. Leasehold law and practice in England and Wales are changing, and rules in Scotland and Northern Ireland differ. Confirm the current position with a qualified UK solicitor before you commit money.