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Home » What does Leasehold mean?

Conveyancing
Looking up at modern apartment block
Oct 14th, 2020

At BLB Solicitors, our goal is simple – to deliver you clear, practical legal advice and cost-effective solutions. We hope you enjoy exploring our Blog. If you can’t find what you’re looking for, please do contact us.

What does Leasehold mean?

Mike Hansom“As a leaseholder, you have many rights and ways to improve your position. But what does leasehold mean? Below, I explain the term. For more information, visit our dedicated Leasehold Property Rights pages.”

Mike Hansom, Head of Leasehold Property Rights

Our team is available on 01225 462871. Alternatively, you can email them or submit the Contact Form below.

What does leasehold mean?

It’s estimated that around one in five homes in England is leasehold. But many people facing a leasehold purchase do not fully understand the difference between leasehold and freehold and the possible implications for them of owning a leasehold property.

If you buy a freehold property, you own the building and the land it stands on. But unlike a freeholder, a leaseholder owns part or all of the building (referred to as the ‘demised premises’) for the lease term but not the land it sits on. So, on the sale of the property, the purchaser acquires the remainder of the term.

Newly created leases can be for any term, typically for 99 or 125 years, but some are for as long as 999 years. And when the lease term expires, the leaseholder’s rights and interests in the property cease and revert to the freeholder.

However, if you meet certain condition and can raise the money, you can extend your lease by:

  • 90 years for a flat; or
  • 50 years on a house.

Can I get a mortgage on a leasehold property?

As a general rule, mortgages are available on leasehold properties. But a lease with less than 80 years left to run is considered short and will be more expensive to extend. Understandably, this significantly devalues the property, making finding a mortgage provider willing to lend on it much more difficult.

Visit our Lease Extension page

Other differences with leasehold property

The subject of leasehold houses has proved controversial, although the vast majority of leasehold properties are flats. Your lease establishes contractual obligations for you and the freeholder (landlord). In most cases, the landlord’s responsibilities include:

  • building management;
  • building maintenance;
  • insuring the building; and
  • the cleaning and maintenance of communal areas such as the lobby, stairs, landings, and any outdoor spaces and structures within the curtilage of the building.

The leaseholders fund these through the payment of an annual service charge. In many cases, unreasonable service charges can be challenged.

Leases inevitably place certain conditions on the leaseholder’s use and occupation of the flat. And these often include restrictions, or even a complete bar, on certain activities and uses of the property. For example, there might be a prohibition on making changes, sub-letting, keeping pets, and using the property for business purposes. So, breaching any of these conditions risks the landlord taking you to court and possibly losing your lease.

Flat owners in a block of flats have a statutory right to take control of the management of their block. They can do this by forming a majority group and exercising the ‘Right to Manage’ created by the Commonhold and Leasehold Reform Act 2002.

If a majority are in favour and can raise the money, flat owners have a statutory right to buy the freehold of their building, known as leasehold enfranchisement (or collective enfranchisement). Leasehold enfranchisement is possible even against the freeholder’s wishes. In return, they must pay a fair price and contribute to their freeholder’s costs.

Mike Hansom
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