Leasehold and leaseholders rights
Leaseholders own property for a limited time, and must consider interests and pay charges to the landlord who owns the freehold.
Overview of leasehold
Where a person owns their home, they own either the freehold or the leasehold of the property.
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, buy or enfranchise their lease.
The lease contains everything that was agreed between the freeholder and the person who originally bought the property as a leaseholder. When the property is sold, the lease is passed on or assigned to the new leaseholder, and they are bound by what was originally agreed.
The terms of a lease may be varied by a deed of variation, which is an agreement subsequent to the lease by which the freeholder and leaseholder agree to vary terms in the lease, such as the extent of the property, the duration of the lease, or service charges. The lease must be read together with variations.
Most leases will have been registered at the Land Registry, and where this is the case, any variation should also be registered.
By law leaseholders have the right to:
extend the lease or buy the freehold of a house under the Leasehold Reform Act 1967
extend the lease or buy the freehold of a flat provided that certain criteria are met
buy the freehold of a flat when it is sold, under the Landlord and Tenant Act 1987
pay a service or administration charge in as far as it is 'reasonable', and to be consulted about certain works
have information on how to challenge service charges
form a company which can take over responsibility for management of the block
avoid repossession for arrears of ground rent or service charges when the debt is relatively low
The right to buy the freehold is one of collective enfranchisement, which means that leaseholders act together to obtain the freehold.
Many of a leaseholder's rights come directly from the terms of the lease.
In some cases, where leaseholders are members of a management company responsible for managing the premises, they may have the right to inspect the register of the management company’s members under section 116 of the Companies Act 2006. The request should specify the person’s name and address, the purpose for which access is sought and details of any third parties that will have access to the information. The management company has five working days to either comply with the request or apply to court for a declaration that access is not sought for a proper purpose. However, if the court agrees with the management company, it may direct the leaseholder to pay the company’s court cost.
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.
Further advice for leaseholders
General advice about leasehold is available from Gov.uk.
The Ministry of Housing, Communities & Local Government has published guidance on rights and responsibilities of leaseholders and a How to lease guide with information for new and prospective leaseholders.
The Leasehold Advisory Service (LEASE) offers specialist advice on leasehold.
Last updated: 11 March 2021