Freehold and Leasehold Title

There are two main types of title to land in England and Wales, both of which may be registered at Land Registry. The type of title to the land in question will depend on the type of property involved and how the building is to be used, and the title to the land will determine, to some extent, the value of the land.

Freehold land is title held by an owner fully, free of any obligations to a superior title. The land may still be subject to covenants or obligations to neighbours and previous owners and the owner will have full responsibility for the maintenance and repairs of the property. Leases can be granted out of freehold land, or the land can be sold or transferred as a whole or in parts. The land can also be mortgaged.  Any transaction must be registered at Land Registry and Stamp Duty Land Tax may be chargeable.

Leasehold land is title held by an owner for the term specified in the lease. The leaseholder is granted the right to occupy the property (land or buildings, house or flat) for the term by the freeholder. At the end of the lease the property returns to the full possession of the freeholder. Lease terms are granted for terms from a few months to 999 years, depending on the circumstances of their creation. Most leasehold flats have leases of between 99 to 125 years when first granted so may well be less by the time the flats are on the market. The majority of leasehold properties are flats, although some houses are leasehold. Mortgage lenders are reluctant to lend money on leasehold properties with fewer than 75 years remaining on the lease term, so in practice, many leases are extended or renewed at that stage.

Underleases or subleases can be granted out of leasehold land, or the leasehold title and can be sold or assigned as a whole. Assignment or underleases of part of leasehold land are unusual but possible. Leasehold property can also be mortgaged.  Any transaction involving a registered leasehold title must be registered at Land Registry. Any new leases with terms of 7 years or more must also be registered at Land Registry. Stamp Duty Land Tax may be chargeable.

The lease stipulates who is responsible for maintaining and repairing different parts of the property and any conditions the leaseholder and the freeholder must meet. The usual obligations on a leaseholder are to pay a ground rent and service charges to the freeholder, to keep the property in good repair and condition and not to cause nuisance or breach any other covenants in the lease. The landlord or freeholder is usually obliged to insure the building and repair and maintain the main structure of the building and any common parts of the property (for which he recovers his costs from the leaseholders by way of the service charge) and to let the leaseholders have quiet enjoyment of their respective properties. If the leaseholder breaches any covenants in the lease, ultimately the freeholder can ‘forfeit’ the lease and the property will be lost by the leaseholder to the freeholder.

For any advice or assistance relating to freehold or leasehold land transactions please contact Robert Croft for residential land and / or Richard Robson or Scott Burdett for residential and commercial property.