What is the definition of leasehold in the residential flat sector?

Considerable confusion is evident amongst flat owners in England and Wales (the law in Scotland is a little different) concerning the definite meaning of leasehold whilst referring to their apartment or flat. You might see flats advertised sometimes as having a ‘share of freehold’ and we deal with this in a separate piece of writing.

The majority of houses in England and Wales are freehold tenure. This means that the ‘owner’ owns the structure 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.

In contrast, under leasehold tenure, there are at the least two parties that ‘own’ the home. These parties are the freeholder - from time to time known as the ‘landlord’ or ‘reversioner’ (explained later on) - and the leaseholder - sometimes referred to as the ‘tenant’ or ‘lessee’. One might even see in legal shorthand the lessee called as L and the freeholder as F.

Here we should plainly differentiate between ‘short leases’, ‘long leases' and ‘Assured Shorthold Tenancies’. The formal definition of a long lease is one that was in the beginning granted for a minimum of 21 years. Leasehold law relates to ‘long leases’, as would be the situation with nearly all flats in England and Wales.

As if to add confusion, the word 'tenant' is used to refer to the long leaseholder in much legal parlance. This tenant is different to the tenant in an Assured Shorthold Tenancy (AST), a form of rental agreement created in the 1988 Housing Act which is the default tenancy form in the private rented sector. An AST is a short-term contractual relationship (often around six months) involving someone who is allowed to stay 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 per month rent more often than not to the leaseholder. This provides them the right purely to live in that dwelling. The leaseholder or apartment owner also pays a rent, a ‘ground rent’, to the freeholder. This is typically paid every 6 months or every year and is typically between £20 and £200 each time under the terms of the original lease.

Mostly in blocks of flats there is one legal owner for the freehold - for all intents and purposes the land and the majority of the building on it - and there is a separate agreement called a ‘long lease’ for the flat owners. It should be noted that every so often there are supplementary parties between the freeholder and the leaseholder like owners of ‘head leases’ or ‘intervening leases’ and one needs to make certain one understands the exact line of ownership. This can be incredibly complex and you might well need the help of a solicitor or surveyor, ideally a member of the Association of Leasehold Enfranchisement Practitioners (ALEP). You will also need to begin with copies of the relevant leases.

The intricacy of the ownership can come as quite a surprise for a lot of people who have paid for an apartment or flat to find that in point of fact they merely apparently part-own it. Generally the lease is longer than the remaining term of the majority of people’s lives so it amounts in practicality to owning the flat outright. Nonetheless, in theory, when the lease runs down to zero, the apartment becomes the sole property of the freeholder. In view of the fact that the majority of leases of apartments for sale are significantly more than sixty years, nearly all buyers will not live to see the day this occurs. If nothing is done, the flat will go back to the freeholder, reverting to them. This is why you will sometimes hear the freeholder referred to as the ‘reversioner’.

About the author
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 http://www.alep.org.uk/membership/.