The primary distinction between freehold and leasehold property is in the ownership of the property. A freehold estate (assuming there is no dispute as to the ownership of the property) provides for indefinite ownership. In contrast, a leasehold estate provides a right to occupy the property for a finite period.
This finite period is determined by the grant, and long leases can be granted for very long terms, for instance, up to 999 years. These are usually granted on payment of a premium.
While this is somewhat akin to freehold ownership, the leasehold ownership will be less valuable than the equivalent freehold ownership. Leaseholders are also often required to make additional payments to the freeholder, such as ground rent and service charge, and will usually have other obligations to the freeholder, such as repairing obligations.
How a leaseholder can legally profit from subletting a property they do not own
Where a long leaseholder is not using the whole or part of the property, they will often seek to sublet. The default position is that a leased property can be sublet for profit by the tenant unless the lease says otherwise.
The key question therefore is whether the lease allows subletting. Even if it does not, the landlord can still provide their consent.
Why the wording of a lease is crucial in determining who keeps rental income
If there is no restriction on sub-letting, the tenant will be entitled to keep the rent received.
If there are restrictions on the ability to sub-let or an absolute prohibition, it may be that the landlord can seek a share of the rent in consideration of granting consent to sub-let.
Clear drafting of the lease provisions is in the interest of both parties to avoid a potentially costly future dispute.
The legal obligations that remain after a tenant moves out but retains a lease
If a tenant vacates a property but still retains the lease (i.e. the lease has not terminated, been sold or otherwise assigned) all the lease obligations remain in force. Examples of common lease obligations that the tenant will likely be required to adhere to include:
1. paying the rents due under the lease (this may include insurance rents);
2. pay the service charge (if there is one);
3. keep the property in good repair and condition; and
4. to ensure a subtenant conforms to any agreed covenants and so on.
Whether Crown Estate lease arrangements differ from those in the private sector
The short answer is yes.
There is a distinct statutory framework which governs Crown land, being the Crown Estate Act 1961 (as amended). The Crown Estate will not be obliged to comply with general leasehold legislation unless the legislation explicitly states that it is bound.
This will ultimately impact its leasing practices.
A key example of a difference between the two regimes is that Crown Estate Commissioners (the statutory body which manages the Crown Estate) are not permitted to grant leases which exceed 150 years. A private landlord is not under this same obligation; they are able to grant long leaseholds for a period of more than 150 years.
Private landlords are also free to agree on whatever rent/premium they would like. However, the Crown Estate Commissioners are required to obtain the best consideration which can reasonably be obtained.
The National Audit Office report dated 28 May 2026 confirmed that leases they grant to members of the Royal family were agreed at the open market value of the time they were granted, and they sought independent, professional advice to inform their decisions on the financial terms of these leases.
What this case could mean for the future management of royal residential properties
There has been a lot of focus on the Crown Estate's lease arrangements recently, particularly with the reports that Andrew had been subletting Royal Lodge.
As the National Audit Office report confirms, the Crown Estate currently uses information from its processes to negotiate lease terms, but ultimately, leasing terms vary, reflecting the time, circumstances and condition of the property and preferences of the negotiating parties.
The questions being raised in relation to Royal Lodge may well result in the Crown Estate reviewing the robustness of its processes.
