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How do leasehold flats differ from freehold flats?



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By : Andy Szebeni    99 or more times read
Most houses in England and Wales are freehold tenure. This means that the ‘owner’ owns the construction and the ground as one. Technically, the freeholder owns the plot as far as the centre of the planet and above it to the top of the sky.

Conversely, under leasehold tenure, there are at the least 2 parties that ‘own’ the home. They are the freeholder - now and then named as the ‘landlord’ or ‘reversioner’ (defined later on) - and the leaseholder - now and then named the ‘tenant’ or ‘lessee’. You can even notice in legal shorthand the lessee named as L and the freeholder as F.

Here we need to plainly distinguish between ‘short leases’, ‘long leases' and ‘Assured Shorthold Tenancies’. The official definition of a long lease is one that was in the beginning granted for at least twenty one years. Leasehold law relates to ‘long leases’, as would be the case with the majority of apartments in England and Wales.

As if to add confusion, the label 'tenant' is used to refer to the long leaseholder in much legal vernacular. This tenant is not the same as the tenant in an Assured Shorthold Tenancy (AST), a style of rental agreement created in the 1988 Housing Act which is the default tenancy style in the private rented sector. An AST is a short-term contractual relationship (often around six months) concerning someone who is allowed to reside in a flat (or house) by the ‘leaseholder’ in return for a rental payment.

To increase the confusion, both apartment-owners and private rental tenants pay a rent. In the instance of the AST tenant, it is a month-to-month rent ordinarily to the leaseholder. This provides them the right merely to inhabit that dwelling. The leaseholder or flat owner also pays a rent, a ‘ground rent’, to the freeholder. This is generally paid every 6 months or each year and is customarily between £20 and £200 every time under the terms of the original lease.

Normally in developments of flats there is one legal owner for the freehold - effectively the land and most of the structure on it - and there is a separate contract called a ‘long lease’ for the flat owners. Worth noting is that now and then there are supplementary parties in between the freeholder and the leaseholder like owners of ‘head leases’ or ‘intervening leases’ and you need to be certain that one understands the correct line of ownership. This can be especially complex and one may well need the support of a solicitor or surveyor, ideally a member of the Association of Leasehold Enfranchisement Practitioners (ALEP). You will furthermore need to begin with copies of the relevant leases.

The complexity of the ownership can come as quite a shock for many neighbours who have paid for a flat or apartment to find that in fact they no more than actually part-own it. More often than not the lease is longer than the remaining term of the majority of people’s lives so it amounts in practicality to possessing the flat outright. However, in theory, when the lease runs down to zero, the flat becomes the sole property of the freeholder. In view of the fact that the majority of leases of flats for sale are significantly in excess of sixty years, nearly all buyers will not live to see the day this transpires. If nothing is done, the apartment might go back to the freeholder, reverting to them. This is why you will sometimes hear the freeholder referred to as the ‘reversioner’.
Andrew Szebeni is part of the management team of the Association of Leasehold Enfranchisement Practitioners. ALEP has more than 100 members, each vetted before joining. They include solicitors, surveyors, intermediaries, managing agents and other professionals in England and Wales specialising in the field of leasehold enfranchisement. Have look at the searchable list of vetted members at www.alep.org.uk/membership/.

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