Leasehold and Leases – Legal Information

Leasehold and freehold are the two types of legal land ownership (or estates in land), which are found in English Law that governs both England and Wales. When it comes to legal terms, an estate is a bundle of interests, obligations and rights that affect a particular piece of land, rather than it being an area of land. This, therefore, means that one piece of land can have more than one legal estate. By ordering specific Land Registry Documents you can identify whether the property is leasehold.

Every piece of land will have a freehold estate, and there can only be one of these for each individual plot of land, but there may be one or more leasehold estates.

Leasehold Property or Land

The fixed term where an exclusive right is given to occupy the land to the exclusion of others (including the freeholder) is called a leasehold (or term of years absolute). The lease will contain this interest along with a number of other obligations and rights that are valid throughout the period of the term.

The premium (a sum of money) is exchanged for the freeholder to grant this lease and at the end of the term period, this lease is ceased and the freeholder will have the property reverted back to them.

A Tenancy and a Lease – What’s the Difference?

There is no difference really. The term “lease” tends to be used to describe a long lease, that is a lease of 21 years or more whereas the term tenancy tends to be used to describe short leases such as an assured shorthold tenancy (AST). Whereas a long lease can be mortgaged, sold, bequeathed or disposed of by gift the terms of a short lease will usually not permit it to be transferred to anyone other than the tenant. When a property is described as leasehold this means it is let on a long lease and for the rest of this article we will use the word “lease” to refer to a “long lease”.

Typically, a long lease will last for 99 years, with some lasting as long as 999 years, which is considerably longer than tenancies. Rather than paying monthly rent, a premium is paid when the lease is granted, which will be a comparable amount to that which would be paid for a freehold property. You will find that most leases will also come with ground rent which has to be paid and normally equates to no more than £250 a year.

How Do You Benefit from a Leasehold Title?

The freeholder will benefit from a number of advantages when they grant a lease as they (or, in most cases, their successors) will get the property back at the end of the term, they can say how the property should be used, and they can collect ground rent.

Leaseholders can also be at an advantage when the property in question is a flat. If all of the flats contained within this building are under leasehold with a common landlord and there are similar terms detailed within these, the landlord can exercise his rights over the tenants. This will ensure that a continued maintenance charge is paid that will go towards the upkeep of the parts of the property that are used by everyone, and that tenants aren’t causing any nuisance to other inhabitants.

There are sometimes cases where a number of freehold flats within a block will see each tenant having to repair and maintain with all of the others, but these covenants won’t be enforced any future buyers of these flats.