Understanding Leasehold vs Freehold in Prime Central London
Introduction
London’s property market has long attracted international buyers seeking security, heritage and prestige. Yet one of its most distinctive — and often misunderstood — features is the concept of leasehold ownership.
Unlike in many countries where ownership typically means holding the property outright, much of London’s prime housing stock is owned on a leasehold basis. For overseas clients, understanding the distinction between freehold and leasehold is crucial to making a well-judged acquisition, preserving long-term value, and avoiding unexpected costs.
What Is a Freehold?
A freehold property is one in which the owner holds both the building and the land it stands on, indefinitely. Ownership is absolute and does not expire.
In practice, freeholds tend to include:
Entire houses rather than apartments.
Period homes with gardens or mews houses in areas such as Chelsea, Kensington, and Notting Hill.
Many large estates in Belgravia, Mayfair and Marylebone, where land has historically remained under major London estates (Grosvenor, Cadogan, Howard de Walden) — though even here, much is leased rather than owned outright.
Advantages:
No ground rent or service charge obligations.
Full control over the property, subject to planning permissions.
Long-term value retention without lease expiry concerns.
Considerations:
Responsibility for all maintenance and insurance.
Scarcity in central locations; true freeholds are rare and command a premium.
What Is a Leasehold?
A leasehold means that the buyer owns the property (typically the interior of an apartment) for a fixed period granted by the freeholder. When the lease term expires, ownership reverts to the freeholder unless it is extended or purchased outright.
Typical lease terms in Prime Central London range from 99 to 999 years, though shorter leases — even below 60 years — are not uncommon in older buildings.
Key Characteristics:
The leaseholder pays an annual ground rent to the freeholder.
A service charge is payable for maintenance, insurance, and communal areas.
Consent from the freeholder may be required for alterations, subletting, or assignment.
In essence, a leasehold is a long-term tenancy with ownership rights that diminish over time.
Why So Much of Prime London Is Leasehold
The prevalence of leasehold ownership in London dates back centuries. Much of central London was developed under aristocratic estates — notably the Grosvenor Estate (Mayfair and Belgravia), Cadogan Estate (Chelsea), and Howard de Walden Estate (Marylebone) — which retained ownership of the land while granting long leases to developers and occupants.
This system allowed the estates to control the quality and uniformity of development, protect architectural integrity, and maintain long-term value. Today, it still defines the ownership landscape of Prime Central London.
The Importance of Lease Length
Lease length is one of the most critical — and misunderstood — drivers of value.
Above 100 years: usually regarded as a “virtual freehold,” with minimal impact on value.
80–99 years: considered healthy, though buyers should plan ahead for future extension.
Below 80 years: value begins to diminish rapidly. The cost of extending the lease increases sharply once the remaining term drops below 80 years due to “marriage value” provisions.
For UHNW buyers, a short lease can represent opportunity — if negotiated correctly. Properties with shorter leases often trade at a discount, but extending the lease or acquiring the freehold can restore and enhance value significantly.
Extending or Purchasing the Freehold
Under the Leasehold Reform Act, qualifying leaseholders can either:
Extend their lease by 90 years and reduce ground rent to a nominal (“peppercorn”) amount; or
Collectively purchase the freehold with other leaseholders in the building (known as enfranchisement).
The process can be complex and costly, but for prime property it often represents excellent long-term value preservation. The key is to assess the premium (the cost of extension) against likely appreciation once completed.
Common Misconceptions Among Overseas Buyers
“A 99-year lease is long enough.”
Not necessarily. Many international buyers underestimate how quickly lease length affects resale value and mortgage availability.“Service charges are insignificant.”
In prime developments, annual service charges can exceed £20,000–£40,000 — particularly where amenities include porters, lifts and communal gardens.“All flats in one building have identical terms.”
Lease lengths and conditions often vary between apartments in the same block. A full review by a solicitor is essential.
The Role of a Buying Agent
A buying agent ensures that clients fully understand the implications of leasehold versus freehold ownership before committing to a purchase. Their role includes:
Identifying whether a property is leasehold or freehold (this is not always made clear in marketing materials).
Coordinating early due diligence with solicitors to confirm remaining lease term and potential extension cost.
Advising whether to use lease length as leverage in negotiation.
Introducing enfranchisement specialists where relevant.
For overseas clients, this guidance can prevent costly surprises later in the transaction.
Case Study: Short Lease Opportunity in Knightsbridge
An international client was drawn to an elegant lateral flat overlooking a garden square in Knightsbridge. The property had 72 years remaining on the lease, discouraging most buyers.
Working with legal advisers, LHPC established that the freeholder was open to an extension in parallel with the sale. A premium of £400,000 was agreed, restoring the lease to 172 years and eliminating ground rent. The property’s market value rose by an estimated £800,000 within months — a clear example of how understanding leasehold mechanics can unlock value.
Strategic Considerations for UHNW Buyers
When assessing leasehold or freehold properties, consider:
Longevity of ownership intentions — are you buying for five years or fifty?
Desire for control — how important is freedom to renovate or redevelop?
Liquidity — shorter leases can be harder to finance or resell.
Tax implications — ownership structure may influence approach to enfranchisement.
Future exit strategy — aligning lease term with likely resale horizon preserves value.
Conclusion
Leasehold ownership is an intrinsic part of London’s heritage and should not deter buyers — provided it is understood. For discerning international clients, the distinction between leasehold and freehold is less about restriction and more about strategy: knowing how to navigate the system, extend wisely, and buy with foresight.
At Lucie Hirst Private Clients, we ensure our clients approach each acquisition with full clarity — evaluating structure, lease length, and long-term potential before a single offer is made. In London’s most refined market, knowledge is the greatest form of leverage.