Cost Considerations For Leasehold vs. Freehold Properties In The UK Market

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For homebuyers in the UK, one of the biggest decisions is whether to purchase a leasehold or a freehold property. The differences between these two property types can have major cost implications, both at the time of purchase and further down the line. This article will examine some of the key costs buyers should think about when weighing up leasehold vs. freehold, focusing specifically on the UK market.

What is the Difference Between Leasehold and Freehold?

First, it’s important to understand the fundamental difference between a leasehold and a freehold property.

A leasehold property means you have a lease from the freeholder to use the property for a fixed period. Typically this could be for 99, 125 or even 999 years. When the lease expires, ownership returns to the freeholder unless it is extended.

With a freehold property, you own the property and land outright. There is no time limit on how long you can own the property for. Freeholds are the more conventional form of property ownership in the UK.

Key Costs to Factor for Leasehold Properties

If you opt for a leasehold property, there are some specific costs and considerations to be aware of:

  • Ground Rent – This is paid annually to the freeholder for the land the property is built on. Ground rent can increase over time based on clauses written into the lease. Higher ground rents can negatively impact the value and saleability of a leasehold property.
  • Service Charges – Leaseholders must contribute to the upkeep of any shared areas and facilities via an annual service charge. This pays for maintenance, repairs, insurance etc. Service charges often increase from year to year and can be unpredictable.
  • Lease Extension/Renewal – When a lease drops below 80 years, it starts to impact value and mortgageability. Most buyers extend the lease before this point, which involves valuation fees, legal fees and a lump sum payment to the freeholder. 
  • Permission Fees – The freeholder’s permission is required for any major works or alterations which often comes with a fee. There may also be permission charges for subletting.
  • Selling Costs – When selling a leasehold, the freeholder may demand a fee/premium for the lease assignment. There may also be charges for the freeholder to approve a new buyer.

Other Ongoing and One-Off Costs

Beyond the costs intrinsic to leaseholds, there are a range of other expenses buyers should factor in for any property transaction in the UK:

  • Mortgage Fees – Lenders charge application fees, valuation fees and legal fees to set up a mortgage. Arrangement fees can run into the thousands.
  • Conveyancing – Legal fees for the property sale/purchase need to be budgeted for.
  • Surveys – A homebuyer survey or full structural survey is recommended. These inspections help identify any issues with the property.
  • Stamp Duty/Land Tax – This tax is paid when buying a property over a certain value. The SDLT thresholds and tax rates depend on the UK country.
  • Removal Costs – Budget for removals if needed. Costs vary depending on the amount of items being moved.
  • Improvement Works – New buildings tend to require minimal work, but resale homes may need renovations and repairs. These improvement costs can add up.
  • Council Tax and Utilities – Buyers will need to budget for council tax, utility bills, TV licence, broadband etc. when moving to a new property.

Considerations for Buying and Selling Freehold Property

For buyers purchasing a freehold property, the main additional cost to factor in is:

  • Freehold Purchase – This allows you to acquire ownership of the property and land indefinitely. Prices vary greatly depending on the property value and location.

When it comes to selling a freehold home, owners do not need to worry about obtaining permission from a freeholder or paying any lease assignment/renewal fees. However, sellers should budget for other expenses like:

  • Estate Agent Fees – Typically 1-3% of the final sale price. Some agents offer fixed fees.
  • Conveyancing Fees – Similar fee structure to buying conveyancer fees.
  • Home Staging – Preparing the property for viewings and marketing materials. Light restyling can boost the sale price.
  • Advertising – Additional online, print and social media advertising could be worthwhile if the property is attracting limited interest.
  • Disrepair Issues – Any repairs highlighted in the buyer’s survey may need to be addressed by the seller (subject to negotiation).

Overall there are fewer potential costs when selling a freehold, but marketing and conveyancing fees still apply.

What are the Costs of Selling a House?

When selling any property, whether leasehold or freehold, the main expenses for sellers are:

  • Estate agent fees
  • Conveyancer fees
  • Any repairs required before the sale
  • Removal fees if moving
  • Early mortgage repayment charges
  • Capital gains tax (properties other than your main residence)
  • For leaseholds, any permission or assignment fees

Other costs like removals, repairs, staging and advertising may also be required to complete the sale. Home improvements can often secure a better price too.

Sellers need to budget for these costs and factor them into the desired profit from the property sale. Keeping costs down depends on the agreed estate agent fees, conveyancing options and any essential work required before listing the property.


In the UK property market, it’s crucial to understand that leasehold and freehold properties come with quite different cost considerations. When contemplating “what are the costs of selling a house,” these distinctions become even more relevant. Leasehold properties, for instance, come with a set of unique fees, including those related to ground rent, service charges, lease extensions, and selling/assignment costs. These ongoing expenses can add up over time and are important to factor in when considering the overall cost of owning a leasehold property.

On the other hand, freehold properties require buyers to budget for the initial purchase price and standard buying/selling expenses, without the recurring leasehold fees. It’s a simpler cost structure in the short term, which may make freehold properties an attractive option for many buyers.

Prospective property buyers should carefully weigh the long-term cost implications when deciding between a leasehold and a freehold. Seeking early legal and financial advice can be invaluable in helping buyers fully understand these costs and make an informed decision. It’s worth noting that while leaseholds come with extra fees, they can also provide access to properties that buyers might not otherwise afford. For the right property and buyer’s circumstances, these additional long-term costs can be justified by the benefits of owning a specific home or investment.

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