Forms of Ownership

Whilst the majority of houses in the UK are sold freehold (that is, the buyer has complete legal ownership of the property and land), almost all apartments in England and Wales are sold leasehold, which means that although the buyer owns the property, they do not own the ground on which it stands. The freeholder owns the site and charges the leaseholder (the owner of the flat) an annual ground rent. The leaseholder must also pay an annual service charge to the freeholder to cover the maintenance and repairs of the building and its common parts.

• Leasehold Ownership
• Buying the Freehold
• Commonhold

Leasehold Ownership

Leasehold ownership of an apartment gives the property owner the right to occupy and use the apartment for the 'term' of the lease - usually 99 or 125 years. When the lease expires, the apartment reverts to the landlord.

Lease Length

When buying a leasehold apartment, the most important consideration is the length of the remaining lease, particularly if it has less than 50 years to run, in which case you may have difficulty obtaining a mortgage. Experts advise against buying a property with less than 75 years to run.

Extending the Lease

The majority of leaseholders now have a right to extend their lease by 90 years and have their ground rent abolished. To qualify, you must own a lease which was at least 21 years long when it was first granted (this is termed a 'long lease') and you must have owned your flat for a minimum of 2 years.

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The leaseholder usually owns everything within the four walls of the apartment, but not the external or structural walls.

The structure and shared parts of the building and the land it stands on are owned by the freeholder, who is responsible for the maintenance and repair of the building.

Buying the Freehold

The Leasehold Reform, Housing and Urban Development Act became law in 1993, allowing leaseholders the right to buy the freehold between them. This is known as a joint freehold. As this scheme has been running a number of years now, it is becoming more common to see apartments sold with a share of the freehold, rather than with a lease.

The formal procedure (known as Collective Enfranchisement) can be long and complex, and it is recommended that you obtain advice from an experienced solicitor before proceeding. However, the basic requirements are as follows:

• The building must contain 2 or more flats and should normally be self-contained
• No more than a quarter of the internal floor area to be in non-residential use
• At least two thirds of the flats must be owned by qualifying leaseholders who:
• Must not be a business or commercial leaseholder
• Must not own more than two flats in the building
• Must have a long lease (at least 21 years long when it was originally granted)
• At least half of the qualifying leaseholders must be prepared to participate. However, where there are only two flats in the building, both leaseholders mus...