Freehold, leasehold and commonhold
There are three main forms of home ownership (or forms of tenure): freehold, leasehold and commonhold.
Houses are usually sold freehold, but new houses have sometimes been sold as leasehold.
If you own a freehold house, you usually:
- own the property and the land it sits on
- organise and pay for your own maintenance work
- are responsible for insuring the building and contents
- do not have to pay any ground rent
- only have to pay maintenance charges if your house has services shared with neighbours, such as roads on your estate (as shown in the document transferring the property to the first freehold owner)
- can make alterations to the property, if you’ve had any planning permission required and meet building control requirements
Flats – owning a share of the freehold
If you own a flat, you may also own a share of the freehold of the building containing your flat.
If you do not already own a share of the freehold, you may be able to get together with other leaseholders to buy the freehold. This is called leasehold enfranchisement or collective enfranchisement.
You’ll need to set up a management company, with the other leaseholders, which will buy the freehold. Everyone who has a flat in the building owns shares in the company. You should ask a solicitor to help you with this.
The benefits of owning a share of the freehold include:
- the management company sets the length of the leases and can extend leases
- the management company makes the decisions about repairs and maintenance works
- there is no separate freeholder or landlord
- the flat-owners will not have to pay ground rent
A flying freehold is a freehold property built over land which does not form part of the property, such as where a freehold property overhangs another, or projects out from underneath another. This could include:
- rooms built across passageways
- basement vaults
- archways through rear courtyards
Some lenders may need more information about this before deciding whether to lend.
A lease is an agreement between you and the owner. That person or company is the freeholder or landlord. The lease sets out what you can and cannot do as a leaseholder.
If you own a leasehold property, you do not own the land it stands on. If the property is a flat, you do not own the shared parts (like the hallway and stairs) or the structure of the building.
The first person who buys a leasehold property is given a lease to use and occupy the flat for a certain number of years, often 99 or 125 years.
Every time the property is sold, the lease is passed to the new buyer, so the length reduces. As your lease gets shorter, the value of your home will decrease.
Owning a leasehold house or flat usually means you’ll need to:
- pay ground rent to the landlord
- comply with any restrictions in the lease (for example, stating that you cannot run a business from your flat, have a pet or make structural alterations)
- insure the contents of your home (the landlord is usually responsible for maintaining and insuring the whole building)
- contribute to the costs of maintaining and insuring the building (the service charge)
Flats are usually sold leasehold. Shared ownership homes always are. New-build houses have also sometimes been sold as leasehold.
The lease will tell you how much ground rent you'll have to pay.
Ground rents often used to be fixed and were often less than £100 a year. However, some developers and freeholders have been setting ground rents much higher and/or setting escalating rents, which increase in a way specified in the lease.
Leases with these sorts of ground rents can be very expensive and you may have some difficulty selling, particularly as some lenders may not want to lend to anyone who wants to buy your home.
If you own a leasehold home, you may be able to buy the freehold (or a share of the freehold if the home is a flat), through a process called enfranchisement.
The government is looking at how to reform leasehold, including ground rents and enfranchisement, to be fairer to buyers.
Find out more about leasehold reform
Commonhold is a form of ownership (or tenure) for multi-occupancy developments. Each unit-holder owns the freehold of their home, and a commonhold or residents’ association owns and manages the common parts of the property. There are standardised rules for commonhold.
Commonhold was introduced in 2004. Although the commonhold system should give flat-owners more control over the management of their development than leasehold does, very few commonholds have been created since 2004.
The government is looking at how commonhold law can be changed to encourage their creation. The Law Commission consulted on this in 2018/19.
Find out more about the proposals
Leasehold property – GOV.UK guide on owning a leasehold home
How to lease – GOV.UK guide on how to buy a leasehold home
Commonhold – Leasehold Advisory Service guide on commonhold home ownership, including setting up, registering and managing a commonhold, and buying a commonhold unit