What Does Residential Leasehold Mean? FAQs
What is a leasehold property?
Leasehold property is a property interest for a fixed period of time (usually 99 years).
But you do not own the property outright (unlike freehold – which grants you ownership of the building and the land it stands on).
As a leaseholder, you can use the property for the duration of the fixed term of the lease.
The lease sets out:
- the term for which a leaseholder is entitled to the benefit of the interest in the property
- the rights granted with it (and what they are subject to).
Such a lease is granted by a landlord who will be entitled to possession of the property at the end of the lease term.
Find out more here about the differences between Leasehold v Freehold.
I own a leasehold flat. How do I buy the freehold?
Leaseholders of flats within a building have the right to purchase the freehold of their building under the Leasehold Reform and Urban Development Act 1993.
But they must meet certain criteria to do so.
One of these is that 50 per cent or more of the flat owners who are qualifying tenants must participate in the purchase.
To read more about this ‘collective enfranchisement’ process, please see our page on buying the freehold.
(Please note, leaseholders may agree with the freeholder to purchase the interest without exercising any statutory right.)
The leaseholders in my building are buying the freehold. What happens if I don’t participate?
If you do not join in with your fellow leaseholders to buy the freehold then nothing will change for you – except that those leaseholders (or the company formed by them) will become your landlord, assuming that the transaction proceeds without your involvement.
Should you wish to join in and purchase the freehold, the benefits should be made clear to you within the group participating.
Commonly, participants would be offered lease extensions and ‘a say’ in the management of the building.
This will vary from property to property and will depend upon the particular legal position.
How long does a lease extension take?
Unfortunately there is no exact answer to this question. Numerous factors can accelerate or slow down the process.
There are two different routes by which a leaseholder can extend their lease – the statutory and the open market route – and both have different timelines.
These are commonly known as the formal and informal routes. For more information, please see our page on extending your lease.
How do I find out who my freeholder/landlord is?
The easiest place to start is to look at your latest ground rent or service charge demand which you should receive from your freeholder on an annual or more frequent basis (depending on your lease).
Freeholders must by law include full details including their name and address for service of notices under sections 47 and 48 of Landlord and Tenant Act 1987.
Alternatively, if the land is registered you may be able to check the position at the Land Registry by requesting the appropriate title information.
What happens if my lease runs out?
Once your lease expires, your freeholder is free to take back sole possession of the property.
We recommend that any leaseholder concerned about this scenario should contact us for help with extending lease length.
What is a good lease length?
Longer lease length usually means greater value and security.
Some mortgage lenders will not lend on a lease with 90 years or less unexpired term.
Most lenders will investigate matters further when a lease has 80 years or less left to run.
This is a hot topic – mortgage lenders’ requirements are changing from month to month.
How do I know how much I should pay for a lease extension?
As solicitors we cannot advise as to the amount that you should pay for a lease extension. This is the task of a valuer surveyor.
The valuer surveyor you instruct is entirely your choice.
We always suggest instructing someone with appropriate expertise in this complex area.
If you are in doubt, we suggest you research valuer surveyors specialising in leasehold property within the area local to the property.
We are aware of numerous experts across the country. Contact us for further advice.
How long can I extend my lease for?
Under the statutory provisions of the Leasehold Reform Housing and Urban Development Act 1993, a leaseholder (entitled) can extend their lease for an additional 90 years, reducing the ground rent payable to a peppercorn (ie virtually nothing at all).
If a leaseholder enters private negotiations with their landlord there is no set length of lease.
In those circumstances you may agree an extension for anywhere between 1 to 999 years.
But there are risks involved with privately negotiating a lease extension. Please contact us for more information.
Why should I extend my lease?
Most people extend their lease to protect and enhance the value of their property – or to enable the sale of their property.
It is worth speaking to us about your objectives as these are likely to affect any advice we would provide.
What is the meaning of a head lease?
A head lease is usually an original lease granted by a freeholder over an entire development or covering numerous properties within a development.
This lease becomes a head lease when the holder of this lease (the leaseholder) grants a subsequent lease (under lease) over part or whole of the leased property for a fixed term.
Alternatively, a head lease can be granted after any previous leases have been granted.
What is the difference between Landlord, Lessor and Freehold/ Tenant, Lessee and Leaseholder?
The terms ‘landlord’, ‘lessor’ and ‘freeholder’ can be used interchangeably but your lease should refer to only one definition.
The same can be said about the terms ‘tenant’, ‘lessee’ and ‘leaseholder’.
My landlord has served me with a notice under Section 5 of the Landlord and Tenant Act 1987. What can I do?
This notice means your landlord is selling part or all the interest he or she owns within the building.
And before doing so, he or she is offering you and the other leaseholders in the building the first chance to buy.
This is known as ‘the right of first refusal’ under the Landlord and Tenant Act 1987.
This is a right for you – along with the other leaseholders in the building – to purchase that interest at the value offered in the notice...provided certain criteria are met.
One criterion is that more than 50 per cent of qualifying tenants in the building must accept the offer.
I believe my landlord has sold its interest without first offering it to the leaseholders. What can we do about this?
It is a criminal offence for your landlord not to offer you the right of first refusal if he or she is selling an interest in their freehold property (provided they cannot rely on certain exceptions).
In situations where your landlord has not complied with the provisions under the Landlord and Tenant Act 1987, the leaseholders may have ability to enforce the purchase of the freehold against the new landlord.
Can my landlord increase my service charge? What can I do if the service charges are too high?
Your landlord may charge whatever service charge he or she requires to maintain the property – provided that:
- this is consistent with the terms of your lease
- all other statutory/regulatory guidance and procedures are followed.
Leaseholders have a right to challenge ‘the reasonableness’ of service charges by reference to:
- the cost
- the quality of any works or service
- their responsibility to pay the charges.
This application is commonly made to the First-tier Tribunal (Property Chamber).
For more information, please visit our page on service charges.
I am unhappy with the current management of our block by my landlord. Can I manage the block instead?
Residential leaseholders have a statutory right to manage their block of flats – provided certain eligibility criteria are met under the Commonhold and Leasehold Reform Act 2002.
This right is available whether the management of their block has been good, bad or indifferent.
One of the criteria is that 50 per cent or more of the leaseholders must participate.
The legislation states that a right to manage company must be set up to manage the block (or instruct managing agents to do the same) and the participating leaseholders will be members in that company.
Find out more about ‘right to manage’.
Need more help? Contact our residential leaseholder solicitors – our specialist team assists clients across the UK.