When you think about purchasing a house, you are likely to be thinking about the building you would live in. By contrast, English law recognises your ownership of the plot of land that the building stands on rather than your ownership of the building itself. Whilst this is of little importance where houses are concerned, it creates significant problems when it comes to flats and apartments.
When you buy a flat, you cannot simply buy the plot of land like a house-buyer would because there are other flats as well. Instead, when you buy a flat, you effectively purchase the right to live in that property from the owner of the plot of land, and this right is formalised through an agreement called a ‘lease’.
The highest form of ownership under English law is therefore ownership of the plot of land on which a building stands, or the ‘freehold’. Whilst the freehold title can change hands through inheritance or sale, it will never expire. The freeholder is owner of the freehold title and they are essentially able to use their land for whichever purpose they wish. They may simply want to live in a building on the freehold but they may also decide to let other people live in their property, which leads us to leases.
It may be the case that a freeholder owns a piece of land but does not actually need to occupy it themselves at that time. Rather than simply sell the freehold, they may prefer to let you live in it if you agree to pay a fee. At this point you have effectively bought a pass to occupy the freehold and at any time, the freeholder could make this pass void – that isn’t something you are likely to buy into. Therefore, if the freeholder wants to make a profit, they will need to give you legal status through a lease or a tenancy so that you are willing to pay. (‘Tenancy’ and ‘lease’ are interchangeable terms but tenancies generally refer to agreements running for less than 7 years and leases refer to longer agreements).
Owning a lease will entitle the holder to occupy or use the land for a certain period of time. It may be that conditions are attached to this lease, such as regular rent payments, or restrictions on what the land can be used for. However, what makes this a lease rather than a license or a pass for example, is that it awards ‘exclusive possession’ to the leaseholder. This means that the landlord and anyone else can be excluded from the property which essentially means that the leaseholder has control for as long as the lease lasts. This lease can be inherited or sold with the obligations and rights held under the lease passing on to the new leaseholder each time. However, unless you choose to extend your lease [and you have a legal right to force your landlord to do so], your lease will eventually expire – at which stage you will no longer own that property. That’s why you need a lease extension. Click here for more about why you should extend your lease.
When a block of leasehold flats are sold, a lease with rights and obligations attached is given to each to each buyer. As well as each receiving these rights, each leaseholder gets exclusive possession of their part of the building standing on the freehold. A freehold with a block of flats will often remain in the hands of the developer however it may have been purchased by a property company.
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