What to consider when investing in a leasehold flat

Flats in England and Wales are usually sold on a leasehold basis. This means you own the flat for the period set out in its lease, but you do not usually own the building or the land on which it stands.

The building is owned by a freeholder, sometimes called the landlord. Leaseholders will normally contribute towards the cost of maintaining and insuring the building through service charges. Ground rent may also be payable, depending on the terms and date of the lease.

A leasehold flat can be an attractive investment, but there are additional legal, financial and practical checks to make before committing to a purchase.

This article focusses on properties in England and Wales. Different property-law systems apply in Scotland and Northern Ireland.

Understand the potential leasehold issues

The lease is a legally binding agreement that sets out your rights and responsibilities, together with those of the freeholder.

Potential issues can include:

• A short remaining lease
• Ground rent clauses that may concern mortgage lenders
• High or unpredictable service charges
• Planned major works that could lead to additional bills
• Restrictions on subletting or how the property can be used
• Poor management or maintenance of the building
• Costs associated with extending the lease
• Building safety or insurance concerns

Your conveyancer should review the lease, management information and supporting documents carefully before you exchange contracts.

What has changed for leaseholders?

Some provisions of the Leasehold and Freehold Reform Act 2024 came into force during 2025.

Since 31 January 2025, qualifying leaseholders no longer need to own their property for two years before beginning the statutory process to extend their lease or purchase the freehold.

Changes to the right-to-manage process also mean that a qualifying group of leaseholders can take over the management of its building without proving fault or obtaining the freeholder’s permission. The right to manage company will not normally be responsible for the freeholder’s costs, although it must cover its own.

Eligibility criteria and legal procedures still apply, so professional advice is recommended.

In January 2026, the government published a draft Commonhold and Leasehold Reform Bill. Its proposals include:

• Making commonhold the default tenure for most new flats
• Restricting the sale of most new flats as leasehold
• Capping many existing ground rents at £250 a year before reducing them to a peppercorn after 40 years
• Reforming the enforcement of residential leases
• Making it easier for some existing buildings to convert to commonhold

These are proposals in a draft Bill and are not yet the law. The final measures and implementation dates may change as the legislation progresses.

Could a flat produce a competitive rental yield?

The purchase price of a property is an important part of calculating its potential rental yield.

Research published by Zoopla in July 2026 suggested that the average UK flat cost £193,000, compared with £327,000 for a house. It also reported that flat prices had increased by just over 10% since 2016, compared with 43% for houses.

Meanwhile, the Office for National Statistics reported that the average UK private rent reached £1,393 a month in July 2026. The average for flats and maisonettes was £1,361.

A lower purchase price combined with competitive local rent could help a flat produce an attractive gross yield. However, this should not be assumed.

Investors also need to account for:

• Mortgage payments
• Service charges and ground rent
• Letting and management fees
• Insurance
• Maintenance and repairs
• Safety and regulatory work
• Tax
• Void periods
• Major works to the building

Always calculate returns using figures for the individual property and allow for costs changing over time.

Check whether the lease permits subletting

Never assume that a leasehold flat can be rented out.

The lease may prohibit subletting, require the freeholder’s written consent or impose conditions on the type of tenancy that can be granted. It may also restrict holiday letting, short-term occupation, pets, hard flooring or alterations.

If you are buying the flat as an investment, ask your conveyancer to confirm that the intended letting arrangement is permitted.

Consider how the lease could affect your mortgage

Mortgage lenders will consider several leasehold-specific factors, including:

• The number of years remaining on the lease
• Ground rent and any review clauses
• Service charge levels
• Building insurance
• Whether commercial premises form part of the building
• Building-safety concerns
• Restrictions contained in the lease

Different lenders apply different criteria. A lease that is acceptable to one lender may not meet another lender’s requirements.

If you need a mortgage, consider speaking to a suitably qualified adviser with experience of leasehold and buy-to-let property.

Five checks to make before buying a leasehold flat

1. Research local rental demand

Look for an area with sustainable tenant demand, suitable transport links, amenities and access to employment.

Consider which type of tenant the property is likely to attract and whether the flat’s layout, location and facilities meet their needs.

2. Review the lease carefully

Ask your conveyancer to check:

• The remaining lease length
• Whether subletting is permitted
• Ground-rent provisions
• Restrictions affecting tenants or landlords
• Responsibilities for repairs
• The process and likely cost of extending the lease

Avoid relying solely on the property listing or information given during a viewing.

3. Examine service charges and planned works

Request recent service-charge accounts, the current budget and details of any reserve or sinking fund.

Find out whether substantial work is planned, such as repairs to the roof, windows, lifts, cladding or communal areas. Your conveyancer should also check for relevant consultation notices and outstanding disputes.

A low service charge is not automatically positive if insufficient money is being collected to maintain the building.

4. Investigate building safety issues

Building-safety protections are complex and do not apply in the same way to every building or leaseholder.

Ask your conveyancer to establish whether there are known fire-safety or structural concerns, whether remediation work is planned and how any costs may be allocated.

An EWS1 form is not a statutory building-safety certificate, but a mortgage lender or valuer may request one in certain circumstances.

The government-backed Leasehold Advisory Service provides further information about building safety and leaseholder protections.

5. Use experienced professionals

Leasehold purchases involve additional documents, enquiries and potential liabilities.

Consider using a conveyancer who regularly handles leasehold transactions and understands building-safety requirements. If you require borrowing, seek mortgage advice before making a financial commitment.

Is a leasehold flat right for your investment?

A leasehold flat could offer a more accessible purchase price and competitive rental return, but it is important to understand exactly what you are buying.

Check the lease, service charges, management arrangements, building condition and letting restrictions before making a decision. Mortgage, legal and tax advice should be obtained where appropriate.

If you are looking for an investment property, Your Move can help you explore the opportunities available in your area.

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