In England and Wales, there are two primary ways to own property:
- Freehold ownership (also referred to as a freehold title or interest)
- Leasehold ownership (also referred to as a leasehold title or interest)
Both freehold and leasehold titles can be held by individuals or entities, such as companies.
Freeholder
The freeholder possesses freehold title to the land and any buildings (e.g., property) situated on it. As the ultimate owner, the freeholder typically exercises complete control over their property, subject to legal regulations and planning constraints.
In the case of individual homeowners who own and reside in their house, they generally hold the freehold title to the property. As such, they are the freeholders of the property and have full control over it, including responsibilities for repairs, maintenance, insurance, and decisions regarding its sale.
Leaseholder
A freeholder has the authority to grant a lease to another individual (known as the leaseholder or tenant), permitting them to use and occupy the property or a portion of it for a specified duration. By granting the lease, the freeholder assumes the role of the landlord. Throughout the agreed-upon term, the leaseholder shares ownership of the land and buildings with the freeholder.
A lease constitutes a binding contract between the freeholder and the leaseholder, necessitating compliance with its terms. Because it is a contractual agreement, the leaseholder cannot alter its terms without the freeholder’s consent.
Key elements typically outlined in a lease include:
- The duration of the lease specifies how long the leaseholder can occupy the property.
- Rent amount payable by the leaseholder and the schedule of payments.
- The designated areas of the property that the leaseholder is entitled to use and the permitted purpose of use.
- Responsibilities for property maintenance and repairs, delineating which party is responsible for specific elements like roof repairs versus window and door maintenance.
- Additional payments are to be made by the leaseholder, such as service charges, maintenance fees, or contributions to insurance costs.
- Stipulations prohibit certain behaviours, like causing a disturbance to neighbours, making structural modifications, or keeping pets on the premises.
A lease may also grant the leaseholder the right to sublet the property or a portion of it to another party for a shorter term, known as subletting. This arrangement involves a single freeholder with multiple leaseholders.
Whether you are a freeholder or a leaseholder, it is crucial to understand your rights and obligations under property agreements. Contact a member of our property team today for assistance and advice.
