What is Leasehold?

In England and Wales there are legally only two ways that property can be owned; freehold and leasehold. Both are legitimate forms of ownership as they are both capable of registration at the Land Registry and they both entitle the owner to sell and mortgage their property.

The major difference between the two is that leasehold ownership is time limited whereas freehold ownership lasts forever. The significance of a lease is that for its duration the leaseholder is given exclusive possession of the property. This is significant because where a lease has been granted there will always be at least two parties with an interest in the same property. The leaseholder therefore needs exclusive possession in order to enjoy the property without lawful interruption from their landlord.

A lease can be granted for any length of time, provided the duration is definite. Some leases may only be granted for a few days, whilst others for 999 years or more. When a developer grants leases of flats in a new building it is common for them to be granted for 99 or 125 years. Leases granted under the Right to Buy are also usually required to be granted for a term of 125 years.

It is important to understand that a lease is essentially a contract. The lease not only records the fact that the leaseholder has been granted exclusive possession of the property for a specific period of time but it also contains the promises made between the parties that affect the leaseholder’s ownership. For example, in residential property the leaseholder may be restricted from making alterations or from subletting their flat. Conversely the lease may require the landlord to maintain the structure of the building. When interpreting the clauses in a lease the same rules that apply to the interpretation of contracts generally, will apply.