Leasehold

There are approximately 4.8 million leasehold homes in England. Leaseholders pay ground rent, service charges, and often a buildings insurance contribution to the freeholder or management company. The Leasehold Reform (Ground Rent) Act 2022 banned ground rent for new residential leases. The Leasehold and Freehold Reform Act 2024 is designed to make it easier and cheaper for leaseholders to extend their lease or buy the freehold (enfranchisement), and to give leaseholders greater rights over service charges and managing agents, but only some of its provisions are in force so far. Today a statutory lease extension on a flat adds 90 years at a peppercorn ground rent; the 2024 Act will, once the relevant sections are brought into force, extend the statutory term to 990 years and abolish marriage value, but as of October 2026 those sections have not been commenced. Properties with a short lease become harder to mortgage and sell; leaseholders should extend while the lease still has more than 80 years left to avoid the 'marriage value' premium. The First-tier Tribunal (Property Chamber) hears disputes about service charges and management.

In practice, buying a leasehold flat means buying a long-term contract as much as a home. The lease sets out who repairs what, how costs are apportioned between flats, what you may and may not do (subletting, pets, flooring, alterations), and how long you have left. Read the lease itself rather than the estate agent's summary, and check three things before you commit: the unexpired term, the ground rent and any review clause, and the service charge history for the last three years.

Worked example: Rob is buying a flat with 83 years left on the lease. He can extend now, adding 90 years to the remaining term at a peppercorn ground rent. If he waits until the term falls to 80 years or less, the premium jumps because marriage value becomes payable, and the flat becomes harder to mortgage and to sell. He also checks whether the freeholder has served a section 20 consultation notice for major works — if a roof replacement is coming, that cost lands on him after completion, not on the seller, so he negotiates a retention.

The misconceptions are expensive. Leasehold is not renting, but it is not permanent ownership either; the term runs down and the value falls with it. Paying a service charge does not entitle you to manage the building, though you may have a right to take over management collectively. A managing agent works for the freeholder, not for you, even though you pay their fees. And breaching the lease — unauthorised alterations, arrears — can in principle lead to forfeiture, which is why disputed charges should be challenged through the tribunal rather than simply withheld.

Leasehold sits opposite freehold ownership, and generates the two recurring charges leaseholders query most: the service charge and any ground rent. If you are in dispute or planning ahead, read our guides to leasehold disputes, extending your lease, and the right to manage.