Leasehold vs freehold is one of the most important decisions you will ever make when buying property because it directly affects your control, your costs, and ultimately your profit, especially now that the government has introduced a ground rent cap.

Over the years, I’ve met countless investors who only discovered what is a freehold property, what is a leasehold property, or even what is ground rent after they had already bought.

Unfortunately, by then it’s expensive to fix.

So let’s slow this down and walk through leasehold vs freehold properly, the same way I explain it to investors at our property investors network meetings.

In most cases, when you buy a house in the UK, you buy the freehold.

That means you own the building and the land.
There’s no time limit on ownership.
Plus, nobody sits above you collecting extra fees.

That’s exactly what is a freehold property. It’s permanent ownership.

However, flats work differently.

Because several homes sit inside one building, you usually buy a lease instead of the land itself. In other words, you’re buying the right to occupy that space for a fixed term.

That’s what is a leasehold property.

So straight away, you can see why leasehold vs freehold matters. One gives you ownership forever. The other gives you ownership for a period of time.

A freehold property gives you full control.

You decide when to maintain it.
You choose when to refurbish.
There’s no ground rent to pay.
And you don’t answer to a freeholder.

As a result, your numbers stay cleaner and more predictable.
With fewer third parties involved, lenders feel more comfortable and buyers understand it instantly.
Consequently, resale tends to be simpler too.

That’s why many landlords prefer freehold houses.

When someone asks me what is a freehold property, I usually say it’s the closest thing to complete control you’ll get in property investing.

Because of that, many investors naturally favour freehold when comparing leasehold vs freehold, simply because there are fewer surprises and fewer ongoing costs.

By contrast, what is a leasehold property?

It means you own the property for a set number of years, often 99, 125 or 150.

However, every single year that passes reduces the remaining term.

Because of that, the value can drop over time. Mortgages can become harder. And eventually, resale can get trickier too.

On top of that, most leasehold properties include extra costs such as ground rent and service charges.

So while leasehold isn’t necessarily bad, it does come with more moving parts.

If you don’t understand leasehold vs freehold properly, those small charges quietly chip away at your profit.

This is why understanding leasehold vs freehold properly is so important, because the ownership structure directly affects both risk and return.

Here’s where many new investors get caught out.

A flat looks cheap, so they jump in.

Then later they discover the lease only has 60 or 70 years left.

At that point, lenders hesitate. Buyers negotiate harder. The value drops.

Suddenly the bargain isn’t a bargain.

That’s why experienced investors always check the lease term first.

Interestingly, short leases can sometimes create opportunity. If you buy at a discount, extend the lease, and refinance, you can manufacture equity.

However, you only spot those opportunities if you understand the numbers properly.

Next, let’s tackle another common question.

What is ground rent?

Ground rent is simply an annual payment you make to the freeholder because you hold a lease.

Importantly, it usually doesn’t pay for maintenance. It doesn’t fix the roof or clean the hallways. It’s just a contractual charge.

Then, on top of that, you also pay service charges for insurance, cleaning, repairs and management.

So in reality, leasehold owners often have several outgoing costs before the mortgage even starts.

That’s exactly why understanding what is ground rent matters when you calculate cash flow.

When you look at leasehold vs freehold side by side, ground rent is one of the key differences that investors often overlook at first.

Ground rent used to be one of the biggest drawbacks of leasehold property.

In some older leases it doubled every 10 or 20 years, quietly turning a small charge into a serious cost and making flats harder to mortgage or sell.

That picture is now changing quickly.

Under reforms introduced by the UK government, most new residential leases must charge only a peppercorn ground rent, which effectively means zero.

So if you buy a brand new leasehold flat today, there’s usually no meaningful ground rent to pay at all.

For existing leases, further proposals aim to cap many ground rents at £250 per year before eventually reducing them to a peppercorn in the long term.

That’s separate from another threshold investors should understand.

Historically, if ground rent exceeded £250 outside London, the lease could fall under Assured Shorthold Tenancy rules. This created risk for lenders and made some properties harder to finance.

So whether because of legal rules or new reforms, high or escalating ground rent is gradually becoming a thing of the past.

And that makes modern leasehold property far simpler, safer and more predictable for investors.

That said, the ground rent cap doesn’t solve everything.

You still need to account for:

• service charges

• management costs

• lease length

• maintenance

So although the cap helps, proper due diligence still matters.

At the same time, there’s another side to the story.

If someone bought freeholds purely for the ground rent income, these reforms reduce that upside.

As always in property, change creates uncertainty.

And uncertainty often creates opportunity.

So which is better?

Honestly, both can work.

Freehold gives you simplicity and control.
Leasehold can offer lower entry prices and strong city demand.

Ultimately, the winners are the investors who understand leasehold vs freehold before they buy, not after.

Because knowledge removes risk. Guesswork creates it.

Finally, you might hear the term share of freehold.

In this setup, leaseholders collectively own the freehold together. As a result, they usually gain more control over management and costs.

For smaller blocks especially, this can feel like the best of both worlds.

So for many smaller blocks, share of freehold can feel like a practical middle ground between traditional leasehold vs freehold ownership.

That’s why every smart investor I know starts by asking the same question first: leasehold vs freehold, and which one fits this deal best.

If you remember one thing, remember this.

Understanding leasehold vs freehold, knowing what is a freehold property, being clear on what is a leasehold property, and fully grasping what is ground rent and the ground rent cap will protect you from expensive mistakes.

Ownership structure affects profit first.

Get that right, and everything else becomes easier.

If you want to learn this properly and speak to other active investors, come along to one of the property investors network meetings near you. It’s often the fastest way to shorten the learning curve and invest with confidence.

1. What is a Freehold Property?
A freehold property means you own the building and the land outright with no time limit. You don’t pay ground rent and you control all maintenance, which is why many investors prefer freehold when comparing leasehold vs freehold.

2. What is a Leasehold Property?
A leasehold property means you own the home for a fixed term, not forever. You usually pay ground rent and service charges to a freeholder, which is the key difference in the leasehold vs freehold decision.

3. What are the new Government changes for Ground Rent?
Ground rent is an annual fee paid by leaseholders to the freeholder. The government has introduced a ground rent cap of £250 per year on many leases to stop excessive charges and make costs more predictable.

4. Which is better to invest into: Leasehold or Freehold?
Both can work. Freehold offers more control and fewer costs, while leasehold can mean lower entry prices. The right choice depends on your strategy, numbers, and understanding of leasehold vs freehold.

5. How do the new Government changes for leaseholds affect me?
If you own a leasehold, the ground rent cap limits how much you pay each year. If you own freeholds, income may reduce. Either way, understanding what is ground rent helps you protect your profits.

Founded in 2003 by Simon Zutshi, property investors network (pin) is the UK’s longest-running and pioneering property training and networking organisation. We cater for all levels of investors from beginners learning how to start in property to experienced professionals looking to scale. With monthly property networking meetings across the UK, online workshops and hands-on coaching programmes, pin has supported thousands of people to build knowledge, confidence and profitable portfolios. Unlike estate agents or deal sellers, pin focuses purely on UK property training and education, providing a safe and inspiring community for anyone serious about property investing.