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What is a lease?
A lease is a contract between a freeholder and a leaseholder which governs the relationship between them. It is likely to contain conditions under which the leaseholder occupies the property, for example, not carrying out alterations without the landlord’s consent. Express terms contained in a lease are supplemented by implied statutory provisions.
“More than happy with Mike Hansom’s service. I’ve dealt with BLB on and off for years and it’s always been very good”. KB
Our leasehold property expertise
Leasehold law is often complex and unlike freehold property, it usually comes with a raft of continuing rights and obligations (including financial ones). Just navigating a lease can be confusing and it is important to seek advice from a suitably experienced leasehold property solicitor.
We have particular expertise in the following areas:
- Leasehold Enfranchisement
- Lease Extensions
- Right of First Refusal
- Right to Manage
- Service Charge Disputes
- Lease Variations
- Appointment of a Manager
- Leasehold Houses
- Bona Vacantia Freeholds
- Absent Landlords
Discover more about the proposed reforms to residential leasehold. Should you wait or proceed now? |
What is the difference between leasehold and freehold property?
A freeholder owns their property, the land it stands on and the air space above it. A leaseholder effectively has rights to use a property granted by a long tenancy, albeit usually for a ‘term’ of many years; typically 99, 125 or 999.
Often the freehold is owned by a Management Company which is in turn owned and controlled by the leaseholders who each own a ‘share of freehold’. However, the Management Company does not always own the freehold. It all depends on the legal ownership structure of your estate, set out in your Lease.
While leasehold property can be bought and sold, if the term remaining is less than 80 years, it is considered to be a short lease and mortgage lenders will become increasingly reluctant to advance a mortgage on the property. It may therefore become difficult to sell and will decrease in value gradually over time. You may therefore wish to consider extending your property lease.
Flat owners have a statutory right to buy the freehold of their building, even against their freeholder’s wishes. This process is known as leasehold (or collective) enfranchisement.
There is also a statutory right for flat owners to take control of the management of their building in a process known as Right to Manage (or RTM).
Irrespective of leaseholders’ right of collective enfranchisement, should your freeholder otherwise decide to sell, they may have to offer the right of first refusal to all leaseholders before proceeding. If they do not, your freeholder could be guilty of a criminal offence and the leaseholders may have the right to force the buyer to transfer it to them.
“The insights that you provided have been very helpful and confidence boosting.” MG
Leasehold house
The majority of houses are freehold, but in recent years there has been an increasing trend for developers to sell leasehold houses. This trend is now being reversed in light of the ‘ground rent scandal’ and mortgage lenders’ refusal to lend if the ground rent is or will become too high.
Find out more about buying the freehold of your leasehold house.
“Thank you Mike for your diligence and ready accessibility; we really appreciated that.” MA
Lease terms
As a leaseholder, your relationship with the freeholder and your neighbours is governed by the lease, which is a type of contract, as well as a raft of legislation designed to protect residential long leaseholders. Our leasehold property solicitors can clarify your rights and obligations under the lease.
Leases vary from one property to another, but under the terms of your lease, it is likely that you will have to:
- pay the freeholder/landlord/management company an annual ground rent (caution –read your lease carefully as some ground rents increase sharply or even double every 10 years);
- pay an annual maintenance/service charge to cover the cost of cleaning, gardening and repairs to the common parts, as well as the cost of buildings insurance;
- abide by rules and restrictions (known as covenants) relating to issues as diverse as alterations, subletting, pet ownership, running a business from home and not being noisy or otherwise anti-social. In return, it is common for the freeholder, landlord/Management Company to have to maintain and insure the buildings and common parts, ensure all lessees comply with their lease terms, permit the lessees to occupy and use their flats without interruption (known as “quiet enjoyment”).
“Mike took all of the stress out of what I thought was going to be a difficult and uncomfortable process. Anyone considering enfranchisement should speak to him. Thanks again.” RP
Challenge lease service charges
Leaseholders should be aware that there is a great deal of legislation in place designed to regulate the reasonableness of service charges, including the cost of buildings insurance.
While most leases provide that the freeholder is responsible for the upkeep of the main structural parts of the building, communal areas and surrounding grounds, they are usually able pass the cost of this on to you and your fellow leaseholders. This is in addition to the ground rent.
It is not unusual to find that you must also contribute to a sinking fund as part of the service charge to cover the future cost of any larger long-term projects such as replacing the roof.
Often, a freeholder will use a managing agent or a separate management company to look after issues such as cleaning, maintenance and the collection of ground rent. However, if a majority are in favour, flat owners can exercise their right to take control of the management of their block to appoint their own agent or self manage.
Lease forfeiture
It is very important to note that if you fail to pay ground rent or service charges, your freeholder can seek enforcement. This can include an application to Court, or the First Tier Tribunal (Property Chamber) or LVT in Wales.
Where the debt is not disputed the landlord can make an application for your mortgage lender to meet the cost, which is likely to be a breach of your mortgage conditions.
While very rare, it is sobering to note that the ultimate sanction for breaching the terms of your lease is forfeiture which results in the Lease being terminated early.