Navigating your journey as a first-time buyer or as someone discovering Shared Ownership can be exciting as much as confusing. We’re here to clear your doubts about what the difference between Leasehold and Shared Ownership is.
What is a Leasehold property?
Leasehold is a form of property ownership in which a person owns a property for a fixed period, rather than owning it outright.
In a leasehold arrangement, the leaseholder has the right to occupy and use the property for the duration of the lease, which can range from a few years to several centuries.
The key aspects of leasehold ownership include:
- The lease has a fixed term, after which the property reverts to the freeholder.
- Leaseholders may pay an annual fee to the freeholder known as ground rent, although ground rent has been banned on most new residential leases created since June 2022. Older leasehold properties may still include ground rent depending on the terms of the lease.
- For maintenance of common areas in buildings with multiple units, service charges apply
- The lease may include restrictions and rules about property use and alterations.
- The freeholder owns the land and building, while the leaseholder owns the right to occupy.
- Leaseholders may have the right to extend their lease, often at a cost. The Government is introducing reforms to strengthen leaseholders' rights, with further changes continuing to be rolled out.
- As the lease term shortens, the property's value may decrease.
Leasehold is common for flats in England and Wales but also applies to some houses.
It's crucial for buyers to understand the terms of a leasehold agreement, as it affects their rights, responsibilities, and the property's long-term value. We recommend talking to a solicitor to understand the terms of the lease as they are qualified experts.
Are Shared Ownership properties the only type to be Leasehold?
Many property buyers, particularly first-time buyers, often harbour a misconception that Shared Ownership is the only type of purchase that involves a leasehold agreement.
This misunderstanding can lead to unwarranted hesitation or avoidance of Shared Ownership schemes, despite their potential benefits for those struggling to enter the property market.
In reality, leasehold agreements are common across various types of properties, not just Shared Ownership homes.
Many new-build flats, apartments in converted buildings and even some houses are sold as leaseholds. This arrangement is particularly prevalent in urban areas and for properties with shared facilities or spaces.
The association between Shared Ownership and leasehold is strong because almost all Shared Ownership properties are leasehold. Since December 2025, Shared Ownership leases have been legally treated as long leasehold properties, bringing them in line with other long residential leases.
However, it's crucial to understand that this is not unique to Shared Ownership. Buyers who avoid Shared Ownership solely due to its leasehold nature might find themselves facing the same arrangement when purchasing other types of properties, especially in the new-build market.
This misconception can be detrimental, as it may deter potential buyers from exploring Shared Ownership options that could be financially beneficial for them.
It's important for buyers to recognise that leasehold is a common form of property ownership and to focus on understanding the specific terms of any lease, rather than dismissing leasehold properties outright.
What is the difference between Leasehold and freehold?
The main difference between freehold and leasehold lies in the extent of ownership and control over a property.
With freehold, the owner has complete ownership of both the building and the land it stands on, typically indefinitely. Freehold owners have full rights to modify the property (subject to planning permissions) and don't pay ground rent or service charges.
In contrast, leasehold ownership means the buyer owns the property for a fixed term specified in the lease, but not the land it's built on.
Leaseholders may pay ground rent to the freeholder, depending on the terms of their lease. Most new residential leases no longer include ground rent following changes to the law introduced in 2022. Leaseholders may also need permission for major alterations and usually pay service charges for maintenance of communal areas.
When the lease expires, ownership reverts to the freeholder unless extended.
Freehold generally offers more freedom and long-term security, while leasehold involves more ongoing costs and restrictions but can be more affordable, especially for flats and apartments.
What are the different types of Leasehold purchases?
Leasehold purchases come in several forms, each catering to different property types and buyer needs. The main types include:
- Traditional leasehold flats or apartments
- Leasehold houses
- Shared Ownership schemes
- Retirement properties
- New-build leasehold houses
- Commonhold (a form of freehold for flats)
- Right to manage leases
Traditional leasehold flats or apartments are the most common, where the buyer owns the interior space for a set period.
Leasehold houses, though less common, also exist, particularly in some new developments.
Shared Ownership schemes offer a hybrid model, allowing buyers to purchase a share of a leasehold property while paying rent on the remainder.
Retirement properties often operate on a leasehold basis, designed for older residents with specific amenities and support services.
Some new-build houses are sold as leasehold, a practice that has sparked controversy in recent years.
Additionally, there are variations like commonhold and right-to-manage leases, where leaseholders take over management responsibilities from the freeholder.
The Government is working towards making commonhold the preferred model for new flats in the future, with the aim of giving homeowners greater control over building management and removing the need for time-limited leases.
Each type of leasehold purchase has its own set of rules, costs, and considerations, making it crucial for buyers to understand the specific terms of their lease agreement.
What do I need to consider when buying a leasehold property?
When considering a leasehold property, potential buyers should check the remaining years on the lease.
Leases with less than 80 years can be problematic for mortgages and resale value which is why you can look into extending the lease if necessary.
It is also important to research the freeholder or management company. A reputable freeholder can make a big difference in your leasehold experience.
Buyers should be sure to review the lease carefully to understand any ground rent, service charges, and other costs they could be responsible for. Recent leasehold reforms aim to improve transparency around charges and make it easier for leaseholders to challenge unreasonable costs.
Check if there's potential to participate in right-to-manage schemes or to purchase the freehold collectively with other leaseholders.
For apartments, ensure there are no ongoing cladding issues or associated costs. Have a legal professional review the lease terms to flag any unusual or potentially problematic clauses.
Check if there have been any recent decisions by property tribunals relating to the building or freeholder. Understand who is responsible for building insurance and what it covers.
By carefully considering these factors, you can make a more informed decision about a leasehold property and avoid unexpected issues or costs in the future. You can chat with our experts for any additional information and advice if you're unsure about any aspect of a leasehold purchase.
What is the difference between Shared Ownership and full ownership?
The main difference between Shared Ownership and full ownership is how much of the home you buy initially.
With Shared Ownership you buy a share of the property and pay rent on the rest. This can make it a more affordable way to get onto the property ladder.
You can buy more shares over time by Staircasing, which reduces the rent you pay and can eventually take you to 100% ownership.
With full ownership however, you buy the whole property from the beginning, so you do not pay rent on any remaining share, but you will usually need a larger deposit and a bigger mortgage.
What costs should I expect with a Shared Ownership leasehold home?
Monthly outgoings under Shared Ownership are made up of three main parts:
- Mortgage repayments on your share.
- Rent paid on the unsold share.
- Service charges for the upkeep of communal areas, building insurance, and maintenance.
Combined these can often be lower than renting privately in the same area, with the additional advantage that they also allow you to build equity in your share of the property.
Here is an example of the costs of a 1-bed apartment at KEWB:
- Full Value: £432,500
- Share Value (25%): £108,125
- Deposit Required: £10,813
- Monthly Mortgage: £528
- Monthly Rent: £595
- Monthly Service Charge: £219
- Total Monthly Cost: £1,342
- Max Household Income: £90,000
Frequently asked questions about Shared Ownership & leasehold
The vast majority of Shared Ownership homes are sold on a leasehold basis, especially flats and apartments.
You own the share you buy and pay rent on the remaining share. You can buy more shares over time through Staircasing.
In many cases, yes. Staircasing lets you buy more of your home over time, and some buyers may be able to reach 100% ownership.
Yes, leasehold Shared Ownership homes usually include service charges to cover building maintenance, communal areas, insurance and management costs.
