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What is leasehold?

This content applies to England & Wales

The definition of leasehold and the basic rights of a long leaseholder.

Where a person owns her/his home, s/he will own either the freehold or the leasehold of the property.

Overview of leasehold

In contrast with a freehold, which lasts forever and where there is no higher interest or landlord, a leaseholder's interest in the land is time-limited, and someone else (ie the landlord) holds a higher interest. The terms 'lease' and 'tenancy' have the same meaning, but people who hold a 'long lease' - meaning for most purposes one that is for more than 21 years - enjoy certain statutory rights in addition to the rights given by the lease itself. Long leaseholders are often called owner-occupiers even though they do not hold the freehold of the property.

Long leaseholders have a landlord to whom they usually pay a small annual 'ground rent' and who can, in theory and in limited circumstances, reclaim the property at the end of the lease. In practice, long leaseholders have very strong security of tenure and even at the end of the lease can remain as ordinary tenants if they have not exercised a right to extend or buy/enfranchise their lease. See the page Remaining after the end of lease for more information.

Leaseholders' rights

Although many of a leaseholder's rights come directly from the provisions of the lease itself (see the page The lease), statute gives long leaseholders a number of additional rights. The key rights of a long leaseholder are as follows:

  • to extend the lease or buy the freehold of a house under the Leasehold Reform Act 1967. See the page Extend lease or buy freehold: houses
  • under the Leasehold Reform, Housing and Urban Development Act 1993,  to extend the lease or buy the freehold of a flat provided that certain criteria are met. The right to buy the freehold is one of collective enfranchisement, which means that leaseholders act together to obtain the freehold. See the page  Extend lease or buy freehold: flats 
  • to buy the freehold of a flat when it is sold, under the Landlord and Tenant Act 1987 (see the page Right of first refusal: leaseholders of flats)
  • under the Landlord and Tenant Act 1985, only to pay a service or administration charge in as far as it is 'reasonable', and to be consulted about certain works. The Act also gives leaseholder the right to information on how to challenge service charges. See the section Service charges for more information
  • to form a company which can take over responsibility for management of the block under the Commonhold and Leasehold Reform Act 2002 (see the page Right to manage for details).
  • not to be subject to repossession for arrears of ground rent or service charges when the debt is relatively low. See Repossession of leasehold property.

The Commonhold and Leasehold Reform Act 2002 (CLRA 2002) simplified procedures for extending leases and buying the freehold, and extended consultation requirements by amending the 1967 and 1993 Acts. The CLRA 2002 also added 'improvements' to the type of work subject to the 'reasonableness' test of the Landlord and Tenant Act 1985.

Subletting

Whether or not a long leaseholder can sublet depends on the terms of the lease.[1] See also the page Business tenants and long leaseholders.

Where the lease allows subletting subject to the consent of the landlord, the landlord may make a reasonable administration charge for giving consent. See the page Statutory control of service charges for information on administration charges.

'Airbnb' and holiday lets

The Upper Tribunal has held[2] that a leaseholder who let out her flat for one or two nights at a time to business travellers through the letting agency Airbnb, was in breach of a clause in her lease that required the premises to be used only as 'a private residence'. A traveller who was occupying the flat for a short period of time, such as through Airbnb, was unlikely to consider that s/he was staying in her or his private residence. A longer letting might not breach the condition.

[1] for an example, see (1) Jones (2) Seymour v Roundlistic Ltd [2018] EWCA Civ 2284.

[2] Nemcova v Fairfield Rents Ltd UKUT 303 (LC).

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