Real estate in the UK: what is a leasehold?

In most countries other than the United Kingdom, there is no concept of a leasehold in immovable property constituting valuable and marketable property. Conversely, a leasehold or equivalent property is defined as a short-term agreement under which the tenant or occupant pays market-adjusted rent to occupy the property. While some countries grant legal rights to tenants so that they can continue to occupy the property under a written lease / lease, in most cases the tenant / occupier will not never an interest of economic value.

In the United Kingdom, there is the concept of leasehold, which consists of an economic and marketable interest in real estate. We are not referring here to commercial rentals or short-term residential rentals, but to long-term leases of residential property. Although I referred to the United Kingdom, this article focuses on property in England and Wales, since Scotland has a different property regime. Northern Ireland is similar to England and Wales but there are some distinctions.

From a technical point of view, a long-term lease is a lease that has been established for more than 21 years when it was initially granted. In fact, by convention, a long-term lease will normally be established for an initial term of 99 or 125 years, although sometimes it may last 999 years. It is important to note that if you want to buy an apartment in England and Wales, you will have to buy a long lease. Although it is sometimes possible to buy a part of the freehold of the building in which the apartment is located, the title to the apartment itself will be the leasehold property (leasehold ), for legal and technical reasons. An leasehold on an apartment is perfectly acceptable and marketable. A freehold apartment is very rare and, oddly enough, generally considered to be defective and less marketable than an apartment sold with leasehold.

Houses are sometimes also bought with a leasehold but this is less common than apartments. Houses are usually sold with a freehold. A house sold with a leasehold lease is also generally salable and marketable, provided that a solicitor verifies its particularities. In many cases, a long-term leaseholder will also have the right to purchase full ownership of the home. This can represent an additional investment opportunity.

The highest security category is full ownership and each property in the UK is owned by a freehold owner. When an apartment is initially sold (rather than rented in the short term), the landowner grants / delivers a lease to the buyer. When this buyer sells the apartment, he transfers the lease to his buyer. Sometimes there is an intermediate lease or a main lease. You do not pay rent at full market value, but often you have what is called a land royalty. This usually ranges from GBP 50 to GBP 300 per year, with this amount increasing at intervals, usually 25 years. The lease will establish a management regime under which, for example, the leaseholder of the apartment will have to pay a contribution to common building expenses such as repairs, maintenance and cleaning.

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