What Is the Difference Between a Freeholder and a Leaseholder?
Meta title: Freeholder vs Leaseholder: What's the Difference? | RCB Design & Build Word count: ~750
If you own a flat in London, there is a good chance you are a leaseholder. Approximately forty per cent of properties in London are leasehold, and the proportion is much higher for flats — almost all purpose-built blocks are leasehold. Many homeowners reach the point of planning a renovation before they fully understand what that means in practice.
Here is a clear explanation of the difference — and why it matters when you want to carry out construction work.
What Is Freehold?
A freeholder owns the land and the building absolutely. Freehold title is registered at HM Land Registry and gives the holder permanent, unconditional ownership subject only to planning law, Building Regulations, and any restrictive covenants registered against the title (under the Law of Property Act 1925 s.79).
In practical terms, a freeholder can alter, extend, or refurbish their property — subject to the usual consents — without needing permission from anyone else simply by virtue of ownership. Most Victorian and Edwardian terrace houses in London are freehold.
What Is Leasehold?
A leaseholder has a long-term right to occupy a property under a lease — typically for 99, 125, or 999 years — granted by the freeholder. The leaseholder does not own the land or, strictly speaking, the building. The lease is a contractual relationship between the leaseholder (as tenant) and the freeholder (as landlord).
This distinction has significant practical consequences. The freeholder retains obligations — most importantly, insuring and maintaining the structure and common parts of the building — and recovers the cost through service charges levied on leaseholders.
Ground rent is a fixed annual payment from the leaseholder to the freeholder. The Leasehold Reform (Ground Rent) Act 2022 abolished ground rent on new leases granted from 30 June 2022 — new leases must be peppercorn (effectively zero). Existing leases with historical ground rent provisions continue unchanged, though some — particularly those with doubling ground rent clauses — have caused significant difficulties for resale and mortgage purposes.
Service charge is the leaseholder's contribution to the building's maintenance and insurance, governed by the Landlord and Tenant Act 1985 (ss.18–30F). Leaseholders have the right to challenge unreasonable service charges before the First-tier Tribunal (Property Chamber).
The Leasehold and Freehold Reform Act 2024
The Leasehold and Freehold Reform Act 2024 received Royal Assent in May 2024 and represents the most significant leasehold reform in decades. Key changes include: qualifying lease extensions will be granted for 990 years (once the relevant provisions are commenced); the calculation of lease extension premiums will no longer include marriage value (removing the significant premium uplift that currently applies when a lease falls below 80 years); and the process for acquiring the freehold collectively (enfranchisement) is being made easier and cheaper.
Most provisions of the 2024 Act require secondary legislation to take effect, so the timeline for implementation should be checked against the current status of commencement orders.
Why This Matters for Construction
Licence to Alter. Most leases contain a covenant preventing the leaseholder from carrying out structural alterations without the freeholder's prior written consent. This consent is known as a Licence to Alter and is a formal legal document. Without it, any structural work — including removing walls, forming new openings, altering the floor structure, or installing new drainage — is a breach of lease.
Obtaining a Licence to Alter involves submitting your proposed works to the freeholder (typically via their managing agent and solicitor), who may appoint their own surveyor to review and approve the scheme. The leaseholder generally pays the freeholder's professional fees as a condition of consent. The process typically takes four to twelve weeks, sometimes longer for complex schemes. This timeline must be built into your pre-construction programme before you appoint a contractor.
Party structure provisions. Within a block, the floors and ceilings between flats are usually structural elements governed by the terms of the lease. Works to these elements typically require both Licence to Alter and, if the floor or ceiling is a party structure, a Party Wall Award under the Party Wall etc. Act 1996.
Right to Extend. Under the Leasehold Reform, Housing and Urban Development Act 1993 (as amended by LFRA 2024), qualifying leaseholders have a statutory right to extend their lease. Qualifying requires two years of ownership. This is particularly relevant where a lease has fallen short, as lenders become restrictive when lease terms drop below 70–80 years.
Right to Manage. Under the Commonhold and Leasehold Reform Act 2002, leaseholders in a qualifying building can take over management from the freeholder without having to purchase the freehold. At least fifty per cent of qualifying leaseholders in the building must participate.
At RCB Design & Build, before pricing any work in a leasehold flat we confirm whether a Licence to Alter is required. That single step affects timeline, scope, and programme — and it is far better to know early than to discover it after a contractor has been appointed.