What is the Difference Between Freehold and Leasehold?

There are two different ways in which you can own a home - either via leasehold or via freehold.

Below we explain the difference between having a freehold agreement in place and a leasehold agreement in place - in terms of how it impacts your rights, responsibilities and expenses as a homeowner.

What does leasehold mean?

A leasehold is a temporary ownership agreement. The word “temporary” is possibly a misnomer in this context with the average leasehold term for a property in the UK being about 999 years.

Having said that, this temporary state of ownership does come with certain restrictions for the homeowner, as while you or your family may temporarily own the home you’ve bought for a few generations to come, the ownership of the land the house was built on never transfers over to you.

Not owning the land means you’ll still need to pay ground rent to the landowner, it also means that there are certain restrictions to the modifications you can make to the land (i.e., any landscaping work you’d like carried out).

Leasehold is particularly common when it comes to properties that encompass several different homes – such as a block of flats. Each individual flat may have its own individual owner but the block as a whole and the land surrounding it may be owned by a managing agent for example.

What does freehold mean?

Having a freehold agreement in place means you own both your home and the land that it's on and, as a result, won't be subject to ground rent.

From a customisation perspective, you'll be able to modify your home, your garden or anything on your land to the degree that'd you like, barring any planning permission restrictions.

Usually, you’ll find a freehold ownership agreement in place with standalone homes, such as with a detached or semi-detached property.

This has become especially true following the Leasehold and Freehold Reform Act of 2024, which has seen a ban placed on property developers selling their new builds as leasehold properties.

Houseowners with existing leaseholds have now been granted additional opportunities to purchase the freehold on their property.

What does ‘Share of Freehold’ mean?

A share of freehold arrangement is one where the residents of a building may decide to all pitch in together to take full ownership of the property – essentially converting a situation where each individual owner has their own leasehold in place to a scenario where everyone in the building collectively shares a freehold claim to ownership of the property and its grounds.

It does, however, come with greater collective responsibility too, with the residents required to manage amongst themselves any issues to do with repairs and maintenance.

While it requires a certain level of mutual trust and respect amongst residents at any given time, it may, in the long run, be seen as a better alternative to paying a yearly service charge, as well as ground rent, to a third-party owner, with each expense seen as more of an investment than a fee.

The benefits of buying a freehold property with Bloor

There are several benefits to owning a freehold property, namely:

• You’ll own your home outright meaning that you can landscape, build walls, redecorate, and apply for planning permission without negotiating with a third party.
• You’ll have something for your future generations to inherit meaning that your home could feasibly stay in your family forever or be immortalised by being donated to organisations like the National Trust.
• You’ll have a more compelling product to offer if you ever decide to sell your home, as you’ll be offering prospective buyers with a home they can own outright, with no strings attached.

As a developer of new build houses, unlike with those selling flats or other shared properties, we make life easy for those looking to have freehold ownership over their own homes.

Discover how easy it is to buy a home with Bloor