PROPERTY TITLE
Freehold, Leasehold
and Commonhold Title
Freehold Most properties which have clearly defined land boundaries
are freehold, hence houses are normally owned freehold and the owner
has title absolute with the benefit of the property in perpetuity.
Leasehold Where it is unfeasible to identify the exact boundaries
of properties or where occupiers are required to fulfil covenants pertaining
to the property there is usually an intervening lease. Thus flats and
maisonettes are normally owned leasehold, the freehold owner of the
land granting a lease to another party to enjoy the use of part of the
land or buildings for a specified time. In this way several rights of
occupation can be granted for a single freehold.
Leases are granted for a finite period of time, often between 99 and
999 years. They set out the responsibilities of the lessee (the flat
occupier) and the lessor (the freehold owner) and cover such matters
as repair of the property and limitations on use. A maintenance charge
may be payable to the freeholder to cover the cost of upkeep of the
common areas, communal gardens and the structure of the property. A
nominal annual ground rent is usually also payable to the freeholder,
often referred to as a peppercorn rent.
Leaseholders may form a company to buy the freehold, in which case each
leaseholder would own an equal share in the company and thus in the
freehold. This protects the leaseholders rights to enjoyment of the
property but ensures that covenants to repair etc. are still enforceable.
It was common in the early 1900s for houses to be sold leasehold, most
often under 99 year ground leases. If occupiers fulfil certain requirements
they have the right to enfranchise the freehold interest under various
Statutes including the Leasehold Reform Act 1967. Similarly tenants
of flats may collectively enfranchise the freehold of the block providing
at least 50% of the lessees are involved. The Leasehold Reform, Housing
and Urban Development Act 1993 Act gives certain qualifying lessees
the right to purchase a new lease of their flat.
If you wish to learn more about Statutes governing leasehold property
there are two useful books published by Longman and written by Trevor
M. Aldridge QC - Aldridge's Residential Lettings and his Law of Flats.
You should of course consult a solicitor if you require assistance and
advice with regard to leasehold property matters.
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Commonhold A new kind of freehold ownership. Commonhold bears
certain resemblances to ownership systems such as condominiums in the
US. It is devised to gradually replace the leasehold system which is the
most common form of ownership for properties such as blocks of flats.
However, conversion to commonhold is not compulsory so both systems will
exist side by side for years to come.
The advantage of commonhold is that it removes the concept of the declining
asset - owners of commonhold properties will no longer have to worry about
how many years are left on their lease. All the flat owners in a block
will automatically be members of a company - the Commonhold Association
- that owns the freehold of the block.
Commonhold ownership may deal with some of the defects in the leasehold
system because residents will have much more say over how their block
is run. However, blocks of flats will still need to be managed. And as
a form of community ownership, commonhold will bring with it various tensions.
To alleviate any possible problems, members will have to sign up to a
"Commonhold Community Statement". This statement will set out all the
rules and regulations you normally find in a lease, for example rules
about subletting, pets, noise and use of gardens. But it will be up to
the commonhold members to enforce these rules, which could lead to potential
conflicts.
In practice, the people most likely to be affected by this new form of
ownership are those purchasing in new developments. While it will be possible
for existing leaseholders to convert their ownership to commonhold, it
will probably prove costly and complex unless you live in a very small
block. An additional hurdle for existing leaseholders is that they must
gain agreement from the freeholder if they wish to convert from leasehold
to commonhold. In short, while the new system should make flat-owning
more equitable for home owners, the problems associated with community
ownership are not going to disappear.
These notes are for guidance only and reflect the position at the time
of writing.
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