If you’re considering buying a flat, you may want to understand how leasehold ownership works. In the UK, many flats are sold on a leasehold basis, meaning you own the property for a specific period rather than owning it outright. This can be a complex area, especially for first-time buyers. In this blog, we’ll explain what a leasehold flat is, how it differs from a freehold property, and cover other important considerations, including insurance and recent changes in UK leasehold law.

What is a leasehold flat?

A leasehold flat is a type of property ownership where you own the flat for a predetermined length of time, often between 99 and 125 years, as specified in the lease agreement. However, the land on which the flat sits and the communal areas of the building are owned by a freeholder, also known as the landlord.

As a leaseholder, you have the right to live in the flat and use it as you see fit, given that it is within the constraints of the lease. However, there are certain responsibilities you must fulfil. These often include paying ground rent to the freeholder, as well as contributing to the maintenance of the building through service charges. These additional charges cover costs like the upkeep of communal areas, repairs to the exterior, and sometimes even the salary of a concierge or maintenance staff.

It must be mentioned that with a leasehold flat, you must get permission from the freeholder to make significant changes to your flat. This can include everything from altering the layout to replacing windows. With this in mind, the terms of your lease will detail what is and isn’t allowed, so it’s crucial to read it carefully before purchasing a leasehold property. At Michael Anthony, we can guide you in your property journey, whether you are searching for flats to rent in Aylesbury or Leighton Buzzard. 

Are all flats leasehold?

In the UK, the vast majority of flats are sold on a leasehold basis. This is because the concept of shared ownership and communal responsibility is easier to manage when one entity—the freeholder—owns the building and land. More specifically, the leasehold system allows for the individual ownership of flats within a larger building while ensuring that the building itself is maintained as a whole.

There are, however, exceptions. Some flats are sold as freehold, particularly in smaller buildings where there are only a few flats, or in converted houses. In these cases, the owners of each flat may collectively own the freehold of the building. This is often referred to as “share of freehold.” While this can provide more control and potentially lower costs, it also means that the flat owners are collectively responsible for the upkeep and management of the building.

Difference between leasehold and freehold flats?

But what exactly are the main differences between leasehold and freehold flats? Ultimately, the main difference between leasehold and freehold flats lies in ownership. When you buy a leasehold flat, you’re purchasing the right to live in the property for the duration of the lease. Once the lease expires, ownership of the property reverts to the freeholder unless you extend the lease.

On the other hand, buying a freehold flat means you own both the property and the land it stands on indefinitely. Freehold ownership offers more control over your property. You won’t even need to pay ground rent or service charges to a freeholder, and you’ll have greater freedom to make changes to your property. 

However, owning a freehold flat also means you’re solely responsible for maintaining the building and land, which can be a significant responsibility, especially in larger properties.

Can you insure a leasehold flat?

You can and should insure a leasehold flat. Typically, the freeholder is responsible for insuring the building, covering damage to the structure and communal areas. However, as a leaseholder, you are responsible for insuring the contents of your flat and any improvements that you’ve made over time. This includes your personal items, furniture, and any changes you’ve made within the flat. 

It is also recommended that you review the insurance policy provided by the freeholder to understand what is covered and what isn’t. For instance, if the freeholder’s insurance doesn’t cover the cost of replacing fixtures or fittings that you’ve added, you’ll need to make sure that your policy covers these items.

New rules on leasehold flats in the UK

The Leasehold and Freehold Reform Act passed in May 2024, is set to introduce important changes to the management of long leases. Although the Act has been passed, most of its provisions will not take effect until 2025/26. 

One of the most significant reforms is the extension of standard lease terms from 90 to 990 years, providing long-term stability. The Act also abolishes the costly ‘marriage value’ premium for lease extensions on properties with less than 80 years remaining, easing the financial burden on leaseholders.

 The two-year waiting period for new leaseholders to extend their lease is expected to be removed, allowing for quicker and more flexible property management. In a similar vein, landlords are now subject to time limits for providing essential information when a leaseholder buys or sells their home. 

We can also expect to see fees capped for sales packs, transparency in service charge billing, and the removal of the requirement for leaseholders to cover landlord legal costs in disputes. 

As these changes roll out in 2025/26, they promise to enhance stability and reduce financial pressures, making leasehold ownership more equitable and manageable for all. For expert advice on navigating leasehold and freehold reforms, contact us  today. We’re here to help with lease extensions, service charges, and all your property needs. 

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