Freehold vs Leasehold: What is the Difference and Why Does It Matter? (including the latest government changes)

Freehold vs Leasehold: What is the Difference and Why Does It Matter? (including the latest government changes)

When buying a home, one of the most important details is whether the property is freehold or leasehold. Many buyers don’t realise how much this affects ownership, costs and long-term security.

Below, our conveyancing solicitors from Liverpool, Halton, and Cheshire break down the key differences, why they matter, and what recent changes to leaseholds in 2026 mean for homeowners.

What is the difference between freehold and leasehold?

English land law has a distinctive doctrine known as the doctrine of estates. You do not own the land itself; rather you own an estate in land. The two estates that are most significant in modern land law are the freehold estate (specifically, the estate in fee simple) and the leasehold estate. The estate in fee simple is an estate of indefinite duration, whereas the leasehold estate only endures for a fixed period of time.

Why the difference matters

1. Control over your property

Leaseholders may need the freeholder’s consent to:

· Make alterations to the property

· Keep pets

· Sublet the property

These restrictions can vary from lease to lease.

 

2. Costs you may not expect

Freeholders generally avoid additional property charges. Leaseholders may have to pay:

· Service charges

· Maintenance and major works contributions

· Ground rent (although government changes are proposing capping these charges and, in many cases, removing them altogether)

Poorly managed buildings can make these costs unpredictable.

 

3. Impact on value and selling

A short lease, particularly under 80 years, can:

· Reduce a property’s market value

· Make mortgages harder to obtain

· Slow or complicate sales

Extending a lease or buying the freehold can often help resolve this, although the processes can be technical and sometimes expensive.

 

4. Long-term security

When a lease expires, the leaseholder no longer has any ownership rights in relation to the property. While this is rare in practice, and most leaseholders act well before expiry, it highlights the importance of monitoring your lease length.

 

What is commonhold?

Commonhold is an alternative form of property ownership, mainly intended for flats, and is often described as a way to own a flat without a landlord.

Under commonhold:

· You can own your home for an indefinite period of time

· There is no lease or ground rent

· Owners jointly manage the building through a commonhold association

· Each owner contributes to maintenance and shared costs, but decisions are made collectively

Although commonhold has been in existence since 2004, it has been rarely used. The government now intends to make commonhold the default ownership model for new flats, as part of the latest leasehold changes, to give homeowners greater control and long-term security.

 

Latest leasehold changes, what you need to know in 2026

Major government leaseholder reforms are coming

The UK government has been pursuing one of the most significant overhauls of the leasehold system in years, and 2026 has brought fresh developments.

Key leasehold changes include:

The removal of the two-year rule Leaseholders no longer have to own a property for two years before extending the lease or buying the freehold. This change came into force on 31 January 2025 and applies to many existing leaseholders too.

Right to Manage Reforms From March 2025, changes to the Right to Manage rules mean:

· Leaseholders in buildings with up to 50% non-residential space can exercise the right

· Freeholders’ legal costs are typically not payable by leaseholders when making a claim

 

Draft Commonhold and Leasehold Reform Bill

Published on the 27th of January 2026, this draft legislation marks the next stage of reform:

Ground rent caps

· Proposed cap of £250 per year for existing residential leases, reducing to a peppercorn (effectively zero) after 40 years.

 

Banning new leasehold flats

· The Bill proposes ending leasehold as the default for new flat sales and steering future owners towards commonhold.

 

Easier transition to commonhold

· Existing leaseholders may be able to convert buildings to commonhold if they choose.

 

Abolishing forfeiture

· For long residential leases, the government proposes ending the “draconian system of forfeiture”, which previously allowed freeholders to repossess a property over relatively small debts, instead introducing astatutory lease enforcement scheme.

 

Note: These draft measures are subject to parliamentary scrutiny and not all will take effect immediately.

You can read the government’s guide to the Draft Commonhold and Leasehold Reform Bill HERE.

 

What leasehold changes mean for buyers and homeowners in 2026

· Leasehold law is changing rapidly, but not all reforms are fully implemented yet.

· Some changes like the removal of the two-year qualifying period, are already in force.

· Others, like ground rent caps and shifts to commonhold, are still progressing through Parliament and may take time to become law.

· Costs, obligations and rights can still vary significantly between leases. If you’re buying, selling, extending your lease, or considering buying the freehold, individual advice is essential.

 

How JR Levins Solicitors can help

At JR Levins Solicitors, our Property team advises clients across Liverpool, Halton and Cheshire on:

· Residential conveyancing, including buying and selling freehold and leasehold properties

· Re-mortgages and transfer of equity work

· Leasehold and freehold aspects of property transfers as part of the conveyancing process

· Landlord and tenant disputes and other residential property disputes, handled by the civil litigation team

We make the process clear, stress-free and fully aligned with the latest legal changes.

📞 Call us: 0151 480 5777

📧 Email: enquiries@jrlevins.co.uk

🌐 Visit: JR Levins Conveyancing Solicitors