Understanding Leasehold Properties

Encountering property “leasehold” options can raise eyebrows in confusion. It is an often misunderstood concept, so let’s look closer.

Unlike freehold properties, where you own both the building and the land it is built on, a leasehold grants you ownership of the property, but only for a pre-determined period. In essence, you are renting the land your property sits on for a specific time frame, as outlined in a legal agreement called the lease. This lease establishes your rights and responsibilities throughout the ownership period.

Think of it this way: with a freehold property, you own the house and the entire garden. In a leasehold situation, you own the house within the garden. Still, the garden belongs to someone else, and you have a contractual agreement (the lease) granting you exclusive access and usage rights for a set period.


Understanding this key distinction is crucial, as it impacts various aspects of owning a leasehold property, including:

  • Ground rent: A periodic fee paid to the land owner (freeholder) for the right to occupy the land.
  • Service charges: Contributions towards the upkeep and maintenance of shared areas within the development (e.g., communal gardens, hallways, lifts).
  • Lease extensions: When the lease nears its end, you have the right to extend it for an additional term, involving legal and financial considerations.

By demystifying the “leasehold” label, we empower you to make informed decisions when buying, renting, or managing a property in London’s luxury market.


The Lease Duration

Imagine owning a beautiful boat but only having the right to sail it for a specific period. That is the essence of a leasehold property – you own the property, but your “sailing rights” are limited by the lease duration.

Lease terms can vary significantly, ranging from shorter leases of 20-40 years (often found in converted properties) to extended terms of 99, 125, or even 999 years. Newly built leasehold properties typically start with longer leases, offering peace of mind for ownership and potential future extensions.


Here is what is crucial to understand:

  • Lease length directly impacts your property’s value and marketability. Shorter leases are generally less desirable for buyers and lenders, as they face the prospect of lease extension costs and shorter remaining ownership periods.
  • Staying vigilant is vital. Please keep track of your remaining lease term, particularly as it approaches the 80-year mark. This crucial threshold affects the affordability and feasibility of lease extensions, significantly impacting your property’s value.


Knowing the length of your leasehold journey empowers you to:

  • Make informed purchasing and investment decisions. Consider your intended ownership period and the impact of the remaining lease term on future value.
  • Plan effectively for potential lease extensions. Understand the associated costs and procedures to ensure a smooth transition when approaching the extension window.
  • Navigate the market with confidence. Knowledge is power, and understanding the lease duration arms you to make well-informed decisions throughout your leasehold ownership experience.


Ground Rent and Service Charges

Owning a leasehold property goes beyond the initial purchase or rental agreement. While you enjoy exclusive property rights, additional costs are associated with maintaining the broader development and upholding your lease agreement.


Ground Rent

This is a periodic fee paid to the landowner (freeholder) for the right to occupy the land your property stands on. Consider it an annual “rent” payment, typically fixed or with pre-determined increases outlined in the lease. While often nominal, some older leases impose significantly higher ground rents, impacting affordability and marketability.


Service Charges

These contributions cover the upkeep and maintenance of shared areas within the development, such as communal gardens, hallways, lifts, and security systems. They may include building insurance, household rubbish disposal, and cleaning services. Service charges are usually calculated based on a pre-determined formula outlined in the lease, ensuring fair distribution among all residents.


Lease Extensions and Freehold Purchases

As your leasehold journey progresses, you might consider extending your ownership rights. Fortunately, options exist to navigate the future: lease extensions and freehold purchases.


Extending Your Lease

A lease extension is like adding more years to your home ownership. When your lease nears its end, you have the legal right (under the Leasehold Reform Act 1993) to extend it for an additional 90 years at a cost calculated according to a set formula.

This extension brings numerous benefits:

  • Increased property value and marketability: A longer lease term significantly enhances your property’s appeal to potential buyers and lenders.
  • Peace of mind for long-term ownership: Extending the lease grants you security and stability, allowing you to enjoy your property for many years.
  • Reduced ground rent: In most cases, your ground rent becomes a peppercorn (a nominal amount) upon lease extension, minimising recurring costs.


Freehold Purchase

For some, owning the land outright holds immense appeal. If you aspire to complete control and enhanced long-term value, purchasing the freehold might be your ultimate goal.

This journey involves:

  • Collective action: If you live in a building with multiple leaseholders, at least 50% must agree to purchase the freehold collectively.
  • Valuation and negotiation: Determining a fair price requires professional valuation and negotiation with the freeholder.
  • Shared benefits and responsibilities: As joint freeholders, you’ll share maintenance costs and decision-making for the entire building.


While potentially complex, purchasing the freehold grants:

  • Complete ownership: You own both the property and the land, offering freedom and control over your space.
  • Increased property value: Freehold properties generally command higher market prices than leasehold equivalents.
  • No more ground rent: Eliminating ground rent frees up additional financial resources for future building maintenance.

Ultimately, the best option depends on your goals, financial situation, and building dynamics. At Crown Luxury Homes, we provide expert guidance and support throughout the process, ensuring you make informed decisions aligning with your long-term vision for your property.



While leasehold properties have additional considerations, they offer a distinct and vibrant living experience within London’s luxury property landscape. By understanding the fundamental aspects – lease duration, ground rent, service charges, and extension/freehold options – landlords and tenants can navigate their roles clearly and confidently.

At Crown Luxury Homes, we are committed to empowering you with the knowledge and support needed to thrive in a leasehold environment. With transparency and informed decision-making, your leasehold journey can be smooth, rewarding, and perfectly aligned with your long-term goals.