In the UK, most homes are sold on either a freehold or leasehold basis, although the rules for leasehold properties are slightly different in Northern Ireland and Scotland.
When you buy a property on a freehold basis, you are buying ownership of the property and the land it is built on indefinitely. In fact, you are even entitled to ownership of the airspace directly above you!
In contrast, when you buy a home on a leasehold basis, you are only buying possession of the property for the length of time stated in your lease agreement with the freeholder or ‘landlord’ of the property. Once the lease has expired, ownership will then revert to the freeholder.
Traditionally, extending your lease has been a tricky (and costly) business requiring specialist legal advice. However, it is an essential step for those with a lease of 80 years or less, particularly if they are considering selling in future.
The Leasehold Reform, Housing and Urban Development Act 1993 gives leaseholders the right to buy the freehold to their property, which is known as leasehold enfranchisement, but this also comes at a considerable cost.
So, is it worth buying the freehold to your home or is extending the lease a better option?
Given the many advantages of freehold versus leasehold ownership, buying the freehold to your leasehold property is always the best option as soon as you can afford to do so, since it will give you full ownership and use of your property on a permanent basis.
You can find more information on the process for buying your leasehold property here: www.gov.uk/leasehold-property/buying-the-freehold
Leasehold reform
There have long been calls for the government to review and simplify the leasehold system. Whilst we have seen the abolition of ground rent for new leasehold properties as of 1 July 2022, and the introduction of the Leasehold and Freehold Reform Act 2024 in May 2024 and it’s roll-out by the Labour Government since then, there is still more to do, especially for existing owners of leasehold properties.
You can follow the latest developments on leasehold reform here, and our article What is commonhold? explains the process of commonhold ownership, which, whilst still quite rare in the UK, is proposed as a preferable alternative to the traditional leasehold ownership model for flats and developments which share communal areas.
