Freehold or leasehold: which to buy and why
A freehold is outright, permanent ownership of the property and the land beneath it. A leasehold is the right to hold the property for a fixed number of years, after which it goes back to the freeholder. For commercial investment, freehold is generally preferable: there is no term running down, no ground rent, and no landlord above you whose consent you need.
Last reviewed September 2026.
The difference in substance
Freehold. You own it. Nobody's consent is needed to alter, let or sell, beyond planning and the other statutory requirements. There is no term to run down.
Leasehold. You own a lease. It has a length, it gets shorter every year, and it will contain obligations to the freeholder: ground rent, repairing covenants, restrictions on alterations and on assignment. When it expires, the property reverts to the freeholder.
Why the unexpired term matters so much
A long leasehold with 950 years to run behaves, in practice, much like a freehold. One with 45 years to run does not.
Value falls as the term shortens, and not in a straight line; the fall accelerates as the remaining term gets shorter. Lenders become reluctant well before expiry, usually wanting the term to run comfortably beyond any loan. A short lease with restrictive terms can become very hard to sell at any price.
Extending is sometimes possible by negotiation with the freeholder, but the price reflects the value being handed over, and the freeholder is not obliged to agree.
What to examine in a leasehold
The unexpired term, and what it will be when you expect to sell.
The ground rent, meaning the amount, the basis on which it is reviewed, and how often. Escalating ground rents can do real damage to value.
Consent provisions. If you need the freeholder's consent to alter, sublet or assign, you depend on a third party's cooperation and timetable.
The service charge. In a multi-let building, what you contribute towards, whether it is capped, and what major works are expected.
Repairing obligations, and how they fit with your own tenants' obligations. A mismatch leaves you carrying a cost you cannot recover.
Forfeiture provisions, which set out what happens if you breach the lease.
When leasehold is the sensible choice
It is not automatically inferior.
Parts of buildings, such as an upper floor or a unit in a shopping centre, can only be owned leasehold, because a freehold cannot practically be carved out of them. Long leaseholds of 999 years at a peppercorn rent are close to freehold in substance. And leasehold usually prices below freehold, so a well-structured long leasehold at the right price can be a perfectly good investment.
The mistake is paying a freehold price for a leasehold interest, or ignoring a term that will be short by the time you come to sell.
Why investors prefer freehold
Beyond the absence of a diminishing term: control over the whole asset, including the ability to redevelop, alter or change its use, subject to planning. No third party's consent. No ground rent. And a wider pool of buyers when you sell, which counts for a lot in an asset class where finding a buyer is the hard part.
For a building meant to be held for decades and improved over time, those advantages compound. It is why most of the buildings we have bought for our syndicates over the years have been freehold, including the three York city centre freeholds acquired in 2026.
A practical checklist
Establish which you are buying, and if it is leasehold, how long is left. What that will be at your expected sale date. What the ground rent is and how it is reviewed. Whose consent you need for what. What the service charge position is and what major works are foreseen.
Have a solicitor acting for you review the title and the lease. It is not a document to skim.