Is a leasehold ever a good idea?

I can't speak for the case referred to above but generally speaking if you own the leasehold to a domestic property you have a statutory right to a 90-year extension at peppercorn rent; the (one-off) price is negotiated between you and your landlord. If you fail to agree it goes to tribunal. Typically the price (assuming you renew in good time - we took an extra 90 years at the 65-year mark) will not be enormous - certainly a fraction of the original purchase cost. In the case of the woman and her £700k - presumably that's close to what the flat would cost (16 years is not much to have left on a lease) - when she bought it she should have been advised of the term it had left to run... caveat emptor, generally, but there may have been special aspects to her case.

There are advantages to leasehold if you live in a block of flats - it will then be the case that the landlord is responsible for organising general structural repairs to the block (you will probably still have to pay for them) and maintaining common areas.

There is a right to buy out the freehold; however (in the case of flats) that just gives you a share (1/16th if there are 16 flats) in all the responsibilities of running the block. We discussed it with our solicitor and in our circumstances he couldn't see any real advantage when it is cheaper and much less hassle to extend the lease. We engaged a surveyor to do a valuation of the flat and value the extension and serve notice on the landlord - we agreed a price fairly shortly afterwards and the documentation was settled. It was not a traumatic process.

In her case it went to tribunal and they ruled that £700,000 was the fair market value and that was what she would have to pay. Nightmare!

Interestingly, Leaseholds exist in the US but are called Ground Rents.  they only occur in Maryland and Pennsylvania:  http://en.wikipedia.org/wiki/Ground_rent.  It looks like the MD gov't is looking to overturn it, I seem to recall reading articles in the Baltimore Sun to abolish it as it seems unfair to the ground renters.

Actually leasehold is extremely common in Hawaii. 

http://findarticles.com/p/articles/mi_qa3681/is_200610/ai_n17195157