If you want to buy a flat, rather than a house, you'll have little option but to buy a leasehold one. There's effectively a requirement that all flats are leasehold at the moment.

What's leasehold?

Leasehold ownership of a flat is basically a long tenancy, the right to occupation and use of the flat for a long period ie: the 'term' of the lease. The term is fixed when the lease is originally granted so decreases in length year by year.

However, the leaseholder has the right to get this extended (see below).  A lease is made between the leaseholder (also referred to as a tenant or lessee) and the landlord (also referred to as the freeholder or lessor) giving conditional ownership for the fixed term.

The landlord can be an individual, a company, a local authority or a housing association. It's also quite common for the leaseholders to own the freehold of the building, either individually or through a residents' management company, effectively becoming their own landlord.

What's in a lease?

The lease sets out the contractual obligations of the parties. The leaseholder's obligations will include payment of the ground rent (which can be nominal) to the landlord. Often there's a requirement to pay a contribution to the landlord of the costs of insuring, maintaining and managing the building, known as the service charge. The lease will probably also place certain conditions on the use and occupation of the flat.

The ownership of the flat usually relates to everything within the four walls of the flat, including floorboards and plaster to walls and ceiling, but doesn't usually include the external or structural walls. The structure and common parts of the building and the land it stands on are normally owned by the landlord, who's responsible for the maintenance and repair of the building.

Because of this, the landlord will usually be required to manage and maintain the structure, exterior and common areas of the property and to collect reasonable contributions ie: the service charges from all the leaseholders. The common exception to this is when purchasing a self-contained maisonette in a building of just two maisonettes where each leaseholder is responsible for their part of building including the external structural parts.

Can I do what I want if I own a leasehold flat?

Leaseholders are not necessarily entirely free to do whatever they want in or with the flat; the lease comes with conditions, to protect the rights of everyone with an interest in the building. Principally, the requirements will be to keep the inside of the flat in good order, to pay (on time) a share of the costs of maintaining and running the building, to behave in an acceptable manner and not to do certain things without the landlord's consent, for example, make alterations or sublet.

The landlord has an obligation to ensure that the leaseholder complies with such responsibilities for the good of all the other leaseholders. These rights and responsibilities will be set out in the lease. Then, when the flat changes hands, the seller effectively transfers the existing lease to the new purchaser and all the rights and responsibilities contained in the lease.

It can be difficult to change the conditions of the lease after you've bought, so your conveyancer's role will be ensure that the services provided for and the obligations imposed in the lease are those that you want or can accept.

What other rights does the leaseholder have?

There are a wide range of rights set out in the legislation and advice is readily available, some of these rights include, but are not limited to:

Extending a lease – an individual leaseholder who satisfies certain conditions can insist on a new lease from the landlord, adding 90 years to the existing lease.
Consultation on major works – the landlord cannot carry out major works to the building where it costs any leaseholder more than £250 without first consulting the leaseholders in the proper fashion. If they fail to do this, they may not be able to recover all the costs.
Right of first refusal – in most cases, where the landlord proposes to sell their freehold interest in the building, they must offer it to the leaseholders first or they can be prosecuted.
Challenging service charges – leaseholders can apply to seek a determination of the liability to pay and reasonableness of the charges, whether already paid or not.

So, provided you pay your ground rent and service charges on a regular basis, and provided you generally act in a reasonable manner, then you should have nothing to fear from the provisions in a normal Lease.

Owning a leasehold flat shouldn't be a concern, as long as you know your rights and obligations. With a well-written lease and a properly managed building, a leasehold flat should provide a perfectly good home and a secure investment.

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