Freehold vs Leasehold Property in the UK: What Investors Need to Know
- Expat Property Investments Ltd
- Aug 28
- 7 min read
When buying property in the UK, one of the first distinctions you’ll encounter is whether a property is sold as freehold or leasehold. For non-UK residents and British expats, this concept can be confusing, especially since in many other countries, the land and building ownership are inseparable.
Yet in the UK, this distinction is crucial. It impacts your rights, costs, and ultimately your return on investment.
We get asked all of the time "Freehold vs Leasehold, what is better?" so let’s break it down. What’s the difference? Where did it come from? Which one is better for you as an investor?
If you'd prefer to have a private 45 minute consultation with our UK property experts, you can book this here.
What is Freehold?
Owning a property freehold means you own:
The building itself (house, flat, etc.)
The land it sits on
The rights associated with that land (indefinitely).
Freehold is ownership “forever.” There is no time limit. Once you purchase it, the property remains yours until you decide to sell, gift, or transfer it.
Importantly, with freehold:
There is no ground rent (a charge for occupying that land) payable to anyone.
You are responsible for maintaining the property and the land.
You’re not subject to conditions imposed by a 'freeholder'.
When we are putting together bespoke strategies for our clients, we focus a lot on freehold.
What is Leasehold?
A leasehold property is different. Here, you own the property (usually a flat, sometimes a house) for a fixed period of time, but not the land it sits on. The land belongs to the freeholder, to whom you pay ground rent.
Typical lease terms are 99 years, 125 years, or 999 years. As the lease term reduces, the property’s value can drop, and it becomes harder to mortgage or sell if the remaining lease is short (usually below 75 years). To get a new lease on a property, it can cost a lot of money.
With leasehold:
You must pay ground rent to the freeholder (though reforms are reducing this).
You usually pay a service charge for maintenance of communal areas (e.g. the stairways and gardens in an apartment block)
The freeholder sets rules (for example, restrictions on pets or subletting).
The Origins of Freehold and Leasehold
I find this really interesting. This system dates back centuries to the feudal structure of land ownership in England. After the Norman Conquest in 1066, all land was technically owned by the Crown, who granted rights to nobles (freeholders).
Over time, nobles leased land out to tenants for set periods in exchange for rent or service. This evolved into the modern leasehold/freehold system:
Freeholders = ultimate landowners.
Leaseholders = tenants who enjoy rights of occupation for a defined period.
Today, while the feudal obligations are gone, the legal structure remains. It explains why, in the UK, you can “own” a flat but not the ground beneath it.
As a fully compliant UK property agent, we bring this kind of detail to the investments of our clients around the world. If you want to see how we can help you invest in UK property, contact us here.
Is Freehold and Leasehold applicable to the whole UK?
Just to make things confusing, no.
England & Wales
In England and Wales, the system is the one most investors are familiar with:
Freehold – You own the property and the land outright, indefinitely.
Leasehold – You own the property for a fixed term but not the land; you may pay ground rent and service charges.
This freehold/leasehold split has deep historical roots going back to the feudal land system. It’s also where some of the more controversial practices emerged (like escalating ground rents), which has led to ongoing government reforms.
Key investor takeaway: England and Wales are where the freehold vs leasehold distinction matters most. If you’re an overseas buyer here, you need to do extra diligence on lease terms.
Scotland
Scotland has a completely different system, thanks to its separate legal framework. Here, leasehold residential property no longer exists.
Historically, Scotland had something called “feudal tenure,” which was abolished in 2004. Today, ownership is either:
Absolute ownership (outright): The Scottish equivalent of freehold.
Long leases (rare for residential property now, as most were converted into ownership rights under law).
This means if you buy a house or flat in Scotland, you’ll generally own it outright without the complications of leasehold.
Key investor takeaway: Scotland’s system is simpler and safer for investors when it comes to thinking about freehold vs leasehold (it of course has it's other challenges). You don’t have to worry about ground rents, lease lengths, or service charge disputes in the same way as in England and Wales.
Northern Ireland
Northern Ireland looks similar to England and Wales on the surface, but with its own quirks. Here, you’ll still encounter:
Freehold – full ownership of land and property.
Leasehold – common in urban flats and some houses, with long leases (often 99+ years).
However, in Northern Ireland, long leases are often set up with a “peppercorn” rent (a very low or nominal ground rent), which reduces some of the risks faced by leaseholders in England.
Key investor takeaway: Leasehold in Northern Ireland is usually less problematic than in England, but the principle is the same: always check the lease length and terms.
Why the Differences Exist
The differences boil down to legal history:
Scotland has its own centuries-old legal system (Scots Law), separate from English common law, which abolished feudal-style tenure completely.
England and Wales share the same legal system, where leasehold/freehold survived and became embedded in housing markets.
Northern Ireland inherited the English system but has developed its own local variations.
Where Do You Typically Find Each?
Freehold: Most houses in the UK are sold freehold. You own the land and building outright.
Leasehold: Most flats/apartments are sold leasehold because multiple owners share the same land and building structure. A management company (controlled by the freeholder or leaseholders collectively) oversees communal maintenance.
There are exceptions: some houses, particularly in the North West, were sold leasehold, which has been controversial. Government reforms are gradually addressing this.
Investment Perspective: Freehold vs Leasehold
For UK property investors, especially those based overseas, the distinction matters enormously. Let’s weigh up the pros and cons.
Freehold: The Investor’s Perspective
Pros:
Full ownership, no expiry date.
No ground rent liability.
More attractive to future buyers and lenders.
Lower long-term risk.
Cons:
Responsibility for all maintenance (roof, structure, etc.).
Usually higher entry price compared to leasehold properties.
Leasehold: The Investor’s Perspective
Pros:
Lower purchase price in some cases (especially for flats).
Service charges mean less direct responsibility for maintenance.
Often located in high-demand city centres (London, Manchester, Birmingham, Liverpool, etc.).
Cons:
Lease length reduces over time, reducing resale value.
Ground rent and service charges cut into yield.
Restrictions may limit use (e.g., short lets banned in some leases).
Expensive to extend the lease.
If passing your portfolio on to future generations, they will need to deal with renewing the lease.
Why Freehold is Generally Preferred for Investment
When investing, one of the smartest moves you can make is to minimise risk factors.
Leaseholds introduce multiple risks:
A shortening lease can make the property unsellable or unmortgageable.
Ground rent escalations (where the rent doubles every 10 or 20 years) can erode all returns.
Unpredictable service charges can turn a seemingly profitable investment into a headache.
By contrast, freehold removes these issues. Yes, you’ll handle maintenance yourself (or through an agent), but you’ll never face a lease expiry or a freeholder demanding payments.
That’s why most seasoned investors prefer freehold where possible. Owning the land means you own the value forever, and reduce external risk factors.
But Are Leaseholds Always Bad?
Not necessarily. For overseas investors:
City-centre flats are often leasehold, and these can generate strong rental demand (students, professionals) although we prefer houses.
High-quality leaseholds with 200+ years remaining and low ground rent can still be excellent investments.
The key is due diligence. Before buying leasehold, always check:
Length of lease remaining (ideally 150+ years).
Ground rent terms (peppercorn = good, escalating = bad).
Service charge history.
If the numbers still stack up, a leasehold can be a viable option but it carries more moving parts than freehold.
Reforms You Should Know About
The UK government has recognised issues with leasehold and is reforming the system:
Ground rent ban on most new leases (from 2022).
Plans to make it easier and cheaper to extend leases.
Long-term ambition to phase out leasehold houses.
These are positive changes for buyers, but they don’t completely eliminate the risks.
Which is Best for Non-UK Resident Investors?
If your goal is to:
Maximise yield and minimise unexpected costs → Freehold houses (especially in strong rental markets outside London) are best.
Diversify into prestige markets → You may need to accept leasehold flats in prime London zones, but choose carefully.
Future-proof your investment → Freehold offers simplicity, permanence, and security.
If you want to check your thinking with our team of experts, book a consultation here. Sometimes it's not worth taking the risk.
Final Thoughts
The UK’s freehold/leasehold distinction may seem unusual, but it’s vital to understand before you buy.
Freehold = ownership forever, fewer risks, more control.
Leasehold = ownership for a fixed term, with added liabilities.
As a property investor, especially if you’re overseas and want a “hands-off” investment, removing risk factors is crucial. That’s why freehold is generally the smarter, safer option.
That said, don’t dismiss leasehold entirely. With the right due diligence and strategy, some leasehold flats and houses can deliver strong returns, especially in city centres.
If you’d like tailored advice on which option fits your goals, you can get in touch here or book a call to discuss with our team. And if you’re still exploring, I’d recommend reading our guides on Rental Yield vs Capital Growth and How British Expats & non-UK Residents Can Get a UK Mortgage for a clearer picture of how to structure your investment journey.