Freehold and leasehold tenure

In England and Wales, the two most common types of legal tenure are freehold and leasehold. As a general rule, most houses are freehold while flats and maisonettes are usually leasehold. Based on legal definition, the owner of a freehold property owns everything directly above and below the subject property (subject to some notable exceptions, for example regarding minerals rights and overflying aircraft) in perpetuity (forever). The owner of a leasehold property on the other hand, owns only the floor that the property is located on, with the space above and below owned by others (in the case of a maisonette which can be over two or more floors, the same applies to other properties above or below the floors of the maisonette). Leaseholders will own the property until the lease expires, at which time the property legally reverts to the freeholder. Leaseholders will also be jointly responsible for the maintenance of shared common areas (eg stairwells/corridors) and shared external parts (eg roof and external walls). Normally a service charge is payable to finance the maintenance of shared areas and common parts. A leaseholder will also have to pay ground rent to the freeholder. It is possible for the owners of leasehold properties in a block, to compel the owner of the freehold (often a property investment company) to sell them the freehold of the block, which they will then each hold a share of. In return for this a premium is payable, with the procedure being controlled by statute. The main advantage of this is that the leaseholders can grant themselves long leases (often for 999 years) and will be in control of the blocks management. They will also no longer have to pay ground rent. Where a leaseholders remaining lease term is becoming short (85 years or less), the leaseholder may compel the freeholder to grant them an extension to the lease, in return for the payment of a premium. This procedure is also controlled by statute. The extension of a short lease can prove attractive when agreement cannot be reached with other leaseholders on the purchase of the freehold. However in either case, there will be an element of negotiation with the freeholder to determine the premium payable. Instructing an RICS chartered surveyor to act on behalf of the leaseholder/s, should ensure that the premium is kept to a minimum.

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