Leasehold Property Explained

Leasehold properties are usually flats who have an agreement in place (the Lease) with a Freeholder (or sometimes a superior Leaseholder) which allows the owner to reside at the property for an extended period. This period was often 99 years, but in recent years the period is often longer – 125 years up to 999 years.

Leaseholders will pay a Ground Rent to the Freeholder which is an annual charge for the land the property is located on. (Ground Rent Explained)

Leaseholders will also pay their share of a Service Charge fund which pays for the maintenance and upkeep of the structure of the building, external decorations, internal communal areas, the buildings insurance, servicing of plant and equipment and management costs. (Service Charges Explained)

The Lease

Leases can be very long and incomprehensible. Over time the ways they have been drafted have evolved such that modern leases are often very different to those drafted as recently as the 1970s or 1980s. Nevertheless, when broken down into its constituent parts all leases have a similar fundamental structure.

They all will include:

• The names of the original parties to the Lease. The Freeholder (or superior Landlord) is usually called “the Landlord” or “the Lessor” and the original occupier is “the Tenant” or “the Lessee”. Often, particularly with more modern leases, a company is named as a “Management Company”.

Note that the Lease will remain in these parties’ names until it eventually ends. The subsequent buyers of a Leasehold property will not get a new lease. Instead the original Lease gets “assigned” to them.

• The length of the Lease term.

• The Ground Rent that is payable each year and how, and when, it may increase.

• The Percentage or proportion of the Service Charges that your property is responsible for.

• A definition of the extent of the property. This is usually called “the Demised Premises”. This is very important as it then determines what belongs to you, and hence your responsibility to maintain, and what is retained by the Freeholder and its responsibility to maintain and paid by the service charges.

• The lease will define the rights granted to you as the owner of the flat. For instance, rights of way over communal paths and stairwells and corridors inside the building, the right to use a balcony, a right to use the gardens and other communal facilities such as shared water and sewage pipes. It will also grant still more fundamental rights, such as the rights of a ground floor flat to the shelter provided by flats above and the rights of a top floor flat to the support of the flats beneath it.

It is this share of communal rights that makes Leasehold Property so important and why flats are almost always Leasehold.

The Lease will also reserve some rights for the Freeholder over your property, for example the rights for it, and other leaseholders in the building, to use shared pipes and conduits that may pass through your property.

• The Lease will include covenants and extra regulations which set out what you can and cannot do and which you agree to abide by as owner of the flat. 

It is very important that you read and understand all the covenants you are signing up to and seek the advice of your solicitor or conveyancer before committing to a purchase.

If you are in breach of one or more of these rules the Freeholder can take legal action in a tribunal to force you to abide by them. Some examples of covenants are:

• To pay your Ground Rent and Service Charge on specific days.

• To maintain the flat, and grant access to the Freeholder to make repairs if you do not, at your cost.

• To grant access to the Freeholder on notice or immediately in an emergency – for instance to deal with a leak from your property to the flat below.

• Not to cause noise or other nuisance to neighbours.

• Not to hang washing out on balconies or outside the building.

• Not to let the property out, make any alterations to the flat or use it for business purposes without the Freeholder’s consent.

If a Management Company is named in the Lease you will promise to keep such covenants with both the Freeholder and the Management Company.

• The Lease will then set out the Freeholder’s covenants, that is the promises it makes to you. These will include:

• A covenant for quiet enjoyment. This does not mean you are not to be disturbed by noise but has a more technical legal meaning preventing the Freeholder from disturbing or harassing you to prevent you from enjoying the property

• The obligation to maintain the building (but not your flat itself) including its structure, communal areas inside and outside and plant and equipment servicing the building.

If a Management Company is named in the Lease the obligations to maintain the building will be imposed on that company rather than the Freeholder.

• Often, particularly in more modern leases, the obligations on the Landlord (or Management Company) which can incur expenditure on the Service Charges is listed in detail.

The above summary is purely for general information and is not to be taken as legal advice. All leases and freehold deeds are different and owners or prospective owners must obtain their own independent legal advice on the lease or deeds which govern your particular property.

Your solicitor or conveyancer should provide you with a copy of the relevant lease or transfer deed and explain it fully to you. If he or she has not, or you have any questions or concerns, you should ask your solicitor or conveyancer before you commit to purchasing a property.

As Managing Agent we do not hold copies of all the leases and deeds on any development. If you have not been provided with a copy of the lease or transfer deed, we can usually obtain a copy for you from the Land Registry, but we charge an Administration Fee of £25.00 plus VAT to do so. You may be able to get a copy from the Land Registry yourself at a lesser cost.