Leasehold

What is long leasehold?

Long leasehold is an interest in land which grants a tenant exclusive possession of a property for a fixed period, usually more than 21 years. The lease term decreases in length with each year that passes and creates different rights and responsibilities on the part of both the landlord and the tenant. The rights enjoyed by a tenant under a long lease are much greater than those of other tenants under other types of tenancies.

Leasehold interests are usually granted for flats in purpose-built blocks, converted houses or above commercial properties. Leasehold ownership usually includes everything within the walls of the flat, including floorboards and plaster to walls and ceilings, but excludes the external and structural walls. The structure and common parts of the building are owned by the landlord. The landlord is normally responsible for maintaining and repairing the building and costs are recovered from the tenants through a service charge See: Service Charge. Sometimes, a premium is payable to the landlord (or the existing tenant on assignment) to purchase the lease in addition to a low annual ground rent, payable by the tenant on a particular due date, following the issuing of a prescribed demand by the landlord. In Wales, the prescribed form of notice is detailed in The Landlord and Tenant (Notice of Rent) (Wales) Regulations 2005.

Does the tenant ‘own’ the land?

A tenant under a long lease does not ‘own’ the land and the ownership of the freehold title remains with the landlord. At the end of the lease term (unless the freehold title is purchased by the tenant (see enfranchisement) or the term of the lease is extended old title comes to an end.

What is a lease?

A lease is a contract between the tenant and landlord. The wording of leases for different properties may vary and could contain different obligations, although many of the standard obligations will be similar. Leases can also place certain conditions on the use and occupation of a property. When a leasehold property is sold, all rights and responsibilities pass to the purchaser who then becomes the tenant under the lease. Example obligations you can expect to find in a long lease (illustrative and not exhaustive)

Tenant obligations:

To pay the premium (if applicable)
To pay the annual ground rent
To pay service charge
To keep the property in a standard of repair, decoration and condition as agreed between the parties
Not to make alterations (sometimes this is permitted if the landlord’s consent is obtained)
Not to underlet the whole of the property unless certain conditions are met
Return the property to the landlord at the end of the term in the condition required by the lease

Landlord obligations

To allow the tenant quiet enjoyment of the property (i.e. a right to reside in the property without unreasonable interference from the landlord)
To provide services relating to communal parts of a building or estate (if applicable, such as a long lease of a flat in a building on an estate)
To make sure that each lease in a building, granted for an original term of over 21 years, is made on substantially the same terms
To insure the property at the tenant’s cost by way of insurance rent (if landlord’s responsibility)
To reinstate the property if damaged or destructed by an insured risk (if landlord’s responsibility)
To enforce regulations against a tenant of the building with a lease granted for an original term of over 21 years at the request of another tenant in a building)