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What is the difference between freehold and leasehold?


When you buy a property in England or Wales, you’re not just buying bricks and mortar — you’re buying a legal interest in the land. The two most common forms of ownership are freehold and leasehold, and the difference between them has significant legal and financial implications.

Understanding this distinction is vital when buying at auction, where leasehold properties are common and may come with additional risks or obligations.

What is freehold?

If you own a property freehold, you own:

  • The building, and
  • The land it stands on,
  • Indefinitely — there is no time limit.

You are responsible for maintaining the property, but you do not pay ground rent or service charges to a landlord. Freehold is the simplest and most complete form of ownership.

Typical freehold properties:

  • Detached houses
  • Semi-detached houses
  • Terraced houses

What is leasehold?

If you own a property leasehold, you have:

  • The right to occupy the property for a fixed number of years (e.g. 99, 125, or 999 years),
  • Under a legal lease agreement with the freeholder (also called the landlord),
  • Subject to certain restrictions and ongoing payments.

You do not own the land or the building itself — just the lease.

Why does this matter for auction buyers?

You will typically have to pay:

  • Ground rent to the freeholder.
  • Service charges to maintain communal areas, buildings insurance, cleaning, etc.
  • Contributions to major works on the building.

Leasehold properties are common in auctions — especially flats, maisonettes, and mixed-use buildings. But they can carry significant risks:

  • Short leases reduce value and mortgageability.
  • Unexpected charges or arrears may not be disclosed in full.
  • No LPE1 form or lease summary is often provided in the auction pack.
  • You may have limited ability to extend or alter the property.
  • Some leases contain onerous clauses (e.g. escalating ground rent).

Summary

Freehold means you own everything. Leasehold means you own the right to live in the property for a fixed period, with obligations to a freeholder. If you’re buying at auction, always confirm the ownership type and review the lease terms carefully. At Versus Law, we specialise in identifying leasehold risks and helping clients make informed auction decisions.