About Leaseholds – What Is a Lease and What do you Pay for?

Published: 25/10/2017

If you’re looking around for a flat to buy then you’ll have come across the term ‘leasehold.’ Most flats and some houses are sold with a lease of 999 years or 99 years and there are older properties that have less than 99 years.

Buying leasehold means that you do not own the land upon which the property is built. This is owned by the leaseholder. A leaseholder is normally responsible for common ways in purpose-built or converted flats and for the repair and maintenance of the building. So, for example, if your roof needs fixing, your leaseholder will be responsible for sorting it out. The costs though are usually included in the service charge.

Therefore buying leasehold means you have bought the right to live in the property for the duration of the lease. However, there are laws in place which allow you to renew the lease for a set period (usually 90 years).

Ground Rent

Normally the leaseholder will charge Ground Rent on the property. Many properties only have a small ground rent charge while others can be around the £300 a year mark. Sometimes the ground rent is escalating, rather than fixed. This means it will go up in stages. For example, if you pay £100 a year for ten years and then the rent will rise by £50 to £150 for the next ten years and so on. If under the terms of the lease ground rent is demanded, then you must pay it and if you don’t you can be taken to court.

Service Charges

Services charges are normally included in a lease. They cover the services a landlord must provide for the property. This can include, lighting in communal areas, lifts, concierge service, central heating, cleaning and any staff who are employed for things like maintenance or gardening.

Most service charges also include a reserve fund. This is an amount which is kept in an account to go towards repairs or re-decoration and it means that each flat owner will have less to pay when the time comes to paint common ways or deal with a roof repair.

The service charge can also take into account the costs of having a management company look after the property. A leaseholder can appoint a management company if he or she doesn’t want the responsibility of looking after the property themselves.

Buildings Insurance


The service charge will also include the cost of insuring the building, which is up to the leaseholder. Personal home insurance for contents is the responsibility of the individual flat owner.

Therefore if you buy a leasehold you need to take into consideration the extra charges you’ll need to budget for in the form of ground rent and service charges. However, it does mean that if you live in a leasehold property, unlike a house owner the responsibilities of repairs and maintenance aren't on your shoulders.