The price of a new build is only part of what it costs to own. A flat almost always comes with a lease and a service charge, and many new houses, even freehold ones, sit on estates where the roads, green spaces and play areas are run by a management company that charges every household. These costs can rise, they are set by someone else, and they are hard to get out of once you have bought. Ask about them before you reserve, not at exchange.
Freehold, leasehold and what you actually own
With a freehold you own the building and the land it stands on, with no end date. With a leasehold you own the right to live in the home for a fixed number of years under a lease, and the freeholder owns the building and the land. Most new flats are leasehold, and most new houses are sold freehold.
A lease sets out what you can and cannot do, what you pay and how the building is run. New leases are usually long, often 125 or 999 years, but read the length anyway. Mortgage lenders set minimum lengths, and a shorter lease can make a home harder to sell or remortgage later.
Ground rent on new leases
Since 30 June 2022, most new long residential leases in England and Wales cannot charge a ground rent of more than a peppercorn, which in practice means nothing. That is the effect of the Leasehold Reform (Ground Rent) Act 2022. Retirement homes followed from 1 April 2023.
So if you are buying a newly built flat on a new lease, there should be no ground rent to pay. If a listing or a sales adviser mentions one, ask your solicitor to check the lease before you go any further.
Service charges on flats
A service charge pays for the shared parts of a building: cleaning, lighting, lifts, insurance, the managing agent and a reserve fund for big repairs later on. The landlord or managing agent sets a yearly budget and divides it between the flats, usually by size.
It can go up every year, and a large repair can mean a big one-off bill. Leaseholders have rights here. A landlord must consult leaseholders before major works that would cost any one leaseholder more than £250, and you can ask for a summary of how the charges are worked out. On a brand new block, the first year's budget is an estimate, so ask how it was calculated and what the reserve fund will be.
Estate charges on freehold houses
Many new estates do not hand their roads, open spaces, drainage or play areas to the council. Instead a private management company looks after them and charges every household, freehold or leasehold, a yearly estate charge. The Competition and Markets Authority found in its 2024 study of housebuilding that around 80% of homes sold by the 11 biggest builders in 2021 to 2022 came with estate management charges.
The CMA found that these charges are often unclear, that buyers are given too little information before they buy, and that homeowners struggle to switch to a different management company. The charge is written into your property's legal documents, so it stays with the home when you sell. Ask what it covers, what it costs now, how it can rise, and whether the council is expected to adopt the roads and spaces at any point.
What the law is changing
The Leasehold and Freehold Reform Act 2024 became law in May 2024. It includes a ban on selling most new houses as leasehold, and new rights for homeowners who pay estate charges, such as clearer bills and the ability to challenge charges that are not reasonable. Some parts of the Act took effect quickly. Others need further regulations before they apply, and the timetable has moved.
Because of that, do not assume a protection applies to your purchase. Ask your solicitor which parts of the Act are in force on the date you buy, and check GOV.UK for the current position.
Getting the numbers before you reserve
The New Homes Quality Code expects a developer to give you, before you reserve, an estimate of what you will pay in the first five years for things such as service charges, estate charges and any ground rent. Ask for it in writing and compare it across the developments on your shortlist. Add the yearly figure to your monthly budget alongside the mortgage, council tax and bills.
Then ask your solicitor to read the lease or the transfer deed for the clauses that set the charges, how they can rise, and what happens if you do not pay.
What to know
- Most new flats are leasehold with a service charge. Many new freehold houses still pay a yearly estate charge.
- New long leases granted since 30 June 2022 should have no ground rent beyond a peppercorn.
- The CMA found around 80% of homes sold by the biggest builders in 2021 to 2022 came with estate management charges.
- Parts of the Leasehold and Freehold Reform Act 2024 still need regulations before they apply, so check what is in force when you buy.
- Get the developer's five-year cost estimate in writing before you reserve, and add it to your budget.
Questions to ask the developer
- Is this home freehold or leasehold, and how long is the lease?
- What is the yearly service charge or estate charge, and what does it cover?
- How can the charge rise, and who decides?
- Which management company runs the estate, and can residents replace it?
- Will the council adopt the roads, sewers and open spaces, and when?
Sources
- GOV.UK: Buying or owning a leasehold home
- GOV.UK: Leasehold property, service charges and other expenses
- legislation.gov.uk: Leasehold Reform (Ground Rent) Act 2022
- legislation.gov.uk: Leasehold and Freehold Reform Act 2024
- CMA: Housebuilding market study
- New Homes Quality Board: Part 2 of the Code, information before you reserve
General information only, not financial or legal advice. Rules and offers change, so check the sources and your own adviser before you rely on a figure.