Leasehold Property

leasehold tenure

Leasehold properties are becoming increasingly popular due to more and more property management and development companies selling flats as leasehold.

What is Leasehold Tenure?

Leasehold is a form of property tenure where one can buy the right to occupy land or a building for a given period of time. The lease is purchased from the owner (the freeholder) which entitles the tenant to reside in the property for a stated length of time. Once the lease has expired, the property again becomes possession of the freeholder.

With a leasehold tenure, you do not own the property, you only have a right to occupy it for a certain period and ground rent must be paid to the freeholder before an arranged date each year. It is for this reason that a leasehold property is generally cheaper than a freehold property. Leasehold tenure is most commonly found with flats although there are some houses that are leasehold as well.

The lease will explain who is responsible for maintaining and repairing different parts of the property and any conditions you must meet as a resident such as maintain the garden.

The majority of leases are originally granted for 999 years but existing leases are usually for shorter than this. It is recommended that you should not buy a property with a remaining lease of less than 60 years as most mortgage lenders will be unlikely to lend for leases as this short. This is because the lender firstly needs to ensure the lease is valid for the duration of the mortgage but secondly that there is enough time remaining on the lease to sell easily if the house was repossessed.

e.g. Let's say a lender granted a 30 year mortgage on a leasehold flat with 50 years remaining on the lease. If the borrower defaulted in the final year and the flat needed to be repossessed; they would probably find it difficult to sell as there would now only be 20 years remaining on the lease (which is less than the standard mortgage term of 25 years).

There are costs associated with leases are as follows:

  • Ground rent - An annual rental fee paid the the freeholder in order to occupy the property
  • Service charge - These are payments made to the landlord for services that they provide such as management costs, maintenance and repairs, buildings insurance or even heating provision
  • Reserve fund - A cost that is common with leases is the landlord's ability to collect sums in advance to create a reserve fund in order to provide for any major works that may be required (e.g. lift replacement or external decorations)

As leaseholder you have a right to either extend the lease or even buy the freehold if certain conditions are met, however, this can be an expensive and slow process. The cost to buy the freehold is dependant on many things including the number of years remaining on the lease. A landlord that is prepared to sell their leasehold must be compensated for lost earnings from the lease which include:

  • loss of value when the leasehold reverts to freehold - the anticipated value of the lease after expiry
  • loss of income from ground rent - the amount of ground rent that should've been collected over the remaining years of the lease and
  • the 'marriage value' of the property - the potential for the property to increase in value between the time purchased and the date the lease expires (usually this is split 50/50 between the owner and purchaser).

It is the responsibility of the leaseholder to ensure ground rent and service charges are made in a timely manner. Should they not be paid and the landlord can show their charges are fair and reasonable, it could lead to the landlord repossessing the property.

Advice regarding leasehold property

  • Ensure your solicitor checks that the seller has kept all ground rent up to date before signing the contract
  • Try to steer clear of leasehold properties with a lease of less than 60 years as it is often much harder to secure a lender


  • Leasehold is a form of property tenure where one party buys the right to occupy land or a building for a given length of time
  • Leases can be of various lengths and ground rent must be paid to the freeholder
  • Tenants of leasehold properties have rights to either extend or buy the freehold providing certain conditions are met

For more information about 'Leasehold Property', you can call us on 020 8783 1337 or submit an online quote.