smart way of owning property
What Owning Leasehold
Property Means?
Leasehold is, very crudely put, half-way between renting and freehold ie owning a property outright. If you own property under a lease, there will be a freehold owner (or landlord) who owns the property indefinitely and you, as the leaseholder, will own it for a fixed period of time. After that period of time has elapsed, ownership returns to the freeholder, unless you negotiate a renewal of the lease – or in the case of long leasehold property, you exercise your legal right to force your freeholder to grant you a lease extension of an additional 90 years.
In addition to this right to extend a residential lease, leaseholders also have the legal right to join together to buy the freehold of their block from the landlord – a process known as leasehold or collective enfranchisement - but, again, this right is limited to residential properties only.
Leasehold properties are usually flats, for reasons of land ownership law. By law, when owning a property you need to be able to draw a clear boundary around its land in order to register it at the Land Registry. With flats, which are often situated one on top of the other, there is no physical land beneath each flat or space above it which can be considered to be part of the property, and therefore a block of flats cannot be divided into separate freehold properties.
The block of flats itself will be a freehold property, owned by the landlord or freeholder, but each individual flat will have to be a leasehold property, allowing the tenant to effectively take ownership of that part of the building for a set period of time. A small number of houses are owned on a leasehold basis - particularly if they’re part of a shared ownership scheme in which you purchase a percentage share of the property as a leasehold with a mortgage and rent the other share from the freeholder.
Each individual lease arrangement will be different, setting out what rights and permissions you have to make alterations to the property, the level of ground rent and service charge [or maintenance fees] payable for the upkeep of the property and whose responsibility it is to carry out repairs or deal with domestic issues such as disputes with neighbours or builders. It is standard for a freeholder to charge a leaseholder a service charge or maintenance charge, although you have the right to request a full breakdown of where the money is being spent along with receipts to support it. If your landlord does not provide you with this evidence, he or she is committing a criminal offence and can be prosecuted. Buildings insurance will usually be covered by the landlord, although you will need to arrange your own contents insurance.
Owning a property under a lease can be confusing as all arrangements can differ slightly and the very nature of a leasehold arrangement can be rather daunting to some people, but as long as you read your agreement carefully and understand the terms of your own particular leasehold arrangement, it can be a very smart way of owning property.
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