One of the most common queries that new homeowners have is what it means for a property to be leasehold, compared to freehold. What are the differences between the two? How does this impact a Shared Ownership home? And what does the new Leasehold and Freehold Reform Act, introduced in 2024, mean for all of this? 

As the Shared Ownership experts, we’re here to unpack everything that you need to know about leasehold and freehold homes.

Freehold explained

In the simplest terms, freehold means that you own your home outright, including the land that it’s built on. It’s sometimes also referred to as ‘title absolute’. 

There are benefits to owning a freehold property, such as not being required to pay any ground rent or service fees like you may need to with leasehold homes. However, owning the surrounding land outright means that it’s your responsibility to maintain the home and associated land. This can incur further costs that a leasehold owner wouldn’t need to worry about.

Leasehold explained

A leasehold home, on the other hand, is when you own the property but not the surrounding land that it’s built on. This also often means that you’re leasing the property for a set number of years, and you may need to renew the lease with your landlord or property manager. 

Newly created leases can extend to 999 years, which is essentially the same thing as owning a freehold property. In certain circumstances, leaseholders will also have the option to purchase the lease from the freeholder – converting them to freeholder owners themselves.

Benefits of Leasehold Ownership

Owning a property through leasehold has several advantages, such as:

• Not having to worry about the maintenance of communal areas (such as gardens), which are repaired and maintained by the freeholder
• Not having to pay for building insurance 
• Leasehold properties are often cheaper outright than buying a freehold home

Are Shared Ownership homes leasehold or freehold?

Most Shared Ownership homes are leasehold, because you’re buying a share of the property and the remainder is owned by the housing association (such as Legal & General Affordable Homes). 

This means that you’ll pay a smaller mortgage than owning the home in freehold, because your payments are calculated based on the percentage share that you own. You’ll then pay rent and service fees to the housing association. 

While this combination of costs might seem sizable, it can actually work out cheaper than buying a new home outright. That’s why Shared Ownership homes are designed for buyers who may not be able to afford a sizable deposit and mortgage on a new home, but still want to get on the property ladder for themselves. 

To get a clear idea of what the Shared Ownership costs could look like for you, make sure to take a look at our Affordability Calculator. 

Can you convert a Shared Ownership home from Leasehold to Freehold?

When buying a Shared Ownership home, you’ll initially purchase a share in the property and the remainder will be owned by the housing association. 

Through a process known as ‘staircasing’, you can then subsequently increase your share in the home – reducing the total rent cost per month, which is calculated based on remaining shares. 

However, while you can continue to staircase up to 100% in certain Shared Ownership homes, this doesn’t automatically mean that you become a freeholder. This is because some Shared Ownership homes are flats or apartments that are part of larger buildings, such as East River Wharf in Newham or The Acer Apartments in White City.

Before purchasing a Shared Ownership home, it’s important to discuss the process of transitioning to freehold with the housing association to see whether it’s possible on the specific property you’re looking to buy a share in. 

To learn more, reach out to our friendly team who will be able to guide you on all things Shared Ownership.