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Classes of occupation

The rights and obligations of a person occupying a home will depend on that person’s ‘status’, in other words what class of occupation they enjoy.  The basic concepts are freehold, long leasehold, commonhold, tenancy and licence. 

Freehold is to all intents and purposes outright ownership. However, there are still restrictions on what a person can do with their home, with certain activities requiring planning permission for example.

Long leasehold is generally recognised as being a lease for 21 years or more.  It is different from short-term letting such as fixed term assured shorthold tenancies.  Usually, a payment has to be made to the landlord (or the existing leaseholder on assignment) to purchase the lease (often with a mortgage) and the rights enjoyed by the leaseholder are much greater than those of other tenants.  Leases can be assigned to other people, equivalent to selling the freehold of a house.  The leaseholder will normally pay a small, annual ground rent to the landlord.  The Leasehold Reform Act 1967 gives tenants under long leases the right to buy the freehold of their lease, known as enfranchisement.  There are some potential restrictions to enfranchisement in relation to publicly held land.

Commonhold is a form of collective freehold applicable to flats and was introduced by the Commonhold and Leasehold Reform Act 2002.  Land which is commonhold is divided into units, e.g flats, whose freehold is owned by unit-holders.  The communal areas which are not held by individual unit-holders are held as common parts by the commonhold association, of which every unit-holder is a member.  The rights and obligations of the commonhold association and its members are set out in the commonhold community statement.

Residential tenancies are generally for either a fixed term, or are periodic, i.e. from month to month.  In general, residential tenancies must include exclusive occupation of residential accommodation, payment (i.e. of rent) and must be for a term, in other words, not indefinite (although a tenancy may be periodic indefinitely, as long as it can be determined, for example by one person giving notice to another).  Different types of tenancy afford different local protection.

It does not matter what a tenancy is called, it is the practical effect of the relationship between a landlord and tenant that determines the nature of their relationship, including whether a tenancy has in fact arisen. 

A licence to occupy is different to a tenancy and does not create any estate or interest in the land.  In general, there is no statutory protection in relation to licences.

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