More than 4.98 million homes in England are leasehold — the majority being flats. Yet thousands of buyers sign on the dotted line without fully understanding what they're buying. This guide cuts through the jargon so you know exactly what questions to ask before you exchange.
Run the numbers before you buy
Our Leasehold Calculator estimates extension premiums, lease depreciation and ground rent risk in seconds.
1. Freehold vs Leasehold: What's the Difference?
When you buy freehold, you own the building and the land beneath it outright — forever. When you buy leasehold, you own the right to occupy the property for a fixed number of years defined in the lease. The freeholder (landlord) retains ownership of the structure and land.
| Feature | Freehold | Leasehold |
|---|---|---|
| Ownership duration | Indefinite | Fixed term (e.g. 125 yrs) |
| Ground rent | None | Potentially payable |
| Service charge | None (usually) | Annual payment to freeholder |
| Alterations | Generally free | Requires freeholder permission |
| Mortgageable below 70 yrs | N/A | Extremely difficult |
2. Why Lease Length Is Everything
As a lease gets shorter, the property loses value — and fast. Lenders become increasingly cautious below 85 years, many refuse mortgages under 70 years, and some insurers start charging more. The table below shows how a £300,000 property depreciates based purely on remaining lease:
125+ yrs
Safe
~~100% of value
85 yrs
Watch
~~97% of value
75 yrs
Caution
~~90% of value
60 yrs
Danger
~~75% of value
Source: Savills / Gerald Eve relativity tables (2024 edition). Values are indicative and vary by location.
3. The 80-Year Cliff — Marriage Value
The single most important number in leasehold is 80 years. Once a lease drops below this threshold, something called marriage value kicks in.
What is Marriage Value?
Marriage value is the increase in the property's value that results from extending the lease. Under the Leasehold Reform, Housing and Urban Development Act 1993, the freeholder is entitled to 50% of this increase when the lease has fewer than 80 years remaining. This can add tens of thousands of pounds to the extension premium.
≥ 80 years
No marriage value — extension premium is lower
< 80 years
Marriage value applies — freeholder gets 50% of the gain
Practical advice: If a property has 83–84 years left on the lease, you should extend before it crosses the 80-year mark — waiting costs you significantly more. A statutory lease extension adds 90 years on top of what remains, so a property at 83 years would end up with 173 years.
4. How Extension Premiums Are Calculated
Under the 1993 Act, the statutory formula for a lease extension premium has three components:
Ground Rent Capitalisation
The present value of all future ground rent payments, discounted at a standard capitalisation rate (typically 5–6%).
Reversion Value
The freeholder's right to take back the property when the current lease expires, discounted to today's money.
Marriage Value (if < 80 yrs)
50% of the extra value created by the extension — only applies when the lease is below 80 years.
Beyond the premium, expect to pay freeholder's legal and surveyor costs (usually £1,500–£3,000), your own solicitor's fees, and Land Registry fees. Budget for £3,000–£7,000 in total costs on top of the premium itself.
5. Ground Rent — The Ticking Time Bomb
Ground rent became one of the biggest scandals in UK residential property over the last decade. Many new-build leases were sold with doubling ground rent clauses — where ground rent doubles every 10 or 15 years. A ground rent starting at £250/year can reach £8,000/year within 50 years.
⚠️ Why It Matters More Than You Think
- • High or escalating ground rent makes a property unmortgageable — most lenders won't lend if annual ground rent exceeds 0.1% of property value
- • Onerous ground rent leases are difficult to sell — buyers can't get a mortgage and cash buyers demand a discount
- • The Leasehold Reform (Ground Rent) Act 2022 banned ground rents above a peppercorn for new residential leases — but this doesn't apply to existing leases
Always check the ground rent review clause in the lease before you buy. If it doubles, RPI-linked, or has any escalating mechanism, treat it as a red flag and price in the cost of a lease extension.
6. Service Charges & Estate Charges
In addition to ground rent, leaseholders typically pay an annual service charge to cover maintenance of shared areas: roof, lifts, communal gardens, insurance of the building, concierge, etc.
Service charges vary enormously — from £500/year for a modest flat to £5,000+/year in a managed block with a concierge. Always ask for the last 3 years of service charge accounts and any planned major works. Major works like roof replacement or lift modernisation can generate Section 20 notices demanding thousands from leaseholders at short notice.
7. Your Rights as a Leaseholder
Statutory Lease Extension
After owning the property for 2 years, you have the legal right to extend the lease by 90 years at a nil ground rent. The freeholder cannot refuse.
Collective Enfranchisement
If at least 50% of flat owners in a building agree, you can collectively purchase the freehold. This gives you control over service charges and the building.
Right to Manage (RTM)
Leaseholders can take over management of the building without purchasing the freehold — giving control over service charges and contractors.
First Refusal
If the freeholder decides to sell the freehold, leaseholders have the right of first refusal to buy it at the same price.
8. The Leasehold Reform Act 2024 — What's Changing
The Leasehold and Freehold Reform Act 2024 passed in May 2024 (just before the general election) and introduces significant changes:
✅
2-year wait abolished
Leaseholders can now extend their lease or buy the freehold from day one of ownership.
✅
Marriage value removed
Marriage value will no longer be payable when extending a lease — saving potentially thousands. (Implementation date pending secondary legislation.)
✅
Extension lengthened
Houses will be able to extend by 990 years (up from 50 years) at nil ground rent.
✅
Transparency on service charges
Freeholders must provide clearer breakdowns of service charges and justify major works.
Note: Much of the Act's most impactful reform (removal of marriage value) requires secondary legislation before it takes effect. Always verify the current position with a solicitor at the time of purchase.
9. Buying Leasehold — Due Diligence Checklist
Before exchanging on any leasehold property, verify all of the following:
Years remaining on the lease (aim for 90+ to avoid immediate extension costs)
Ground rent amount and review clause (reject doubling or onerous RPI clauses)
Annual service charge — request 3 years of accounts
Any pending Section 20 major works notices
Whether building is cladded and has an EWS1 certificate if over 18m
Freeholder identity — is it a professional company or absentee freeholder?
Any restrictions on subletting, pets, or alterations in the lease
Building insurance premium and whether your flat is covered
Whether a share of freehold or Right to Manage company exists
Cost estimate for a lease extension (use our calculator below)
10. Is Leasehold Worth Buying?
Leasehold is not inherently bad — the vast majority of UK flats are leasehold, and millions of people live perfectly happily in them. The risks are real but manageable if you go in with open eyes:
Low Risk
- • 90+ years remaining
- • Peppercorn or low fixed ground rent
- • Responsive, reputable freeholder
- • Share of freehold available
Proceed With Care
- • 80–89 years (price in extension)
- • RPI-linked ground rent
- • Service charge rising sharply
- • Offshore or hard-to-reach freeholder
Avoid or Renegotiate
- • Below 70 years
- • Doubling ground rent clause
- • Major cladding/EWS1 issues
- • Pending large Section 20 works
Ready to Run the Numbers?
Use our free Leasehold Calculator to estimate the extension premium, see how the lease discount affects your property value, and assess ground rent risk — all in one place.