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Freehold and Leasehold differences

FREEHOLD, LEASEHOLD

COMMONHOLD AND CHATTEL RESIDENCES

 'Tenure' a the term you will find common in property agents and solicitors. It refers to the way in which a property is owned and will be found on the property 'Deeds'

FREEHOLD:  The most straightforward and common form of tenure. It means that you have full and complete ownership of a property being the land and what stands on it. Freehold ownership is usually for houses, bungalows, cottages, chalets, and land although rarely you may find a freehold flat, in such an instance consult your solicitor as definitions as to responsibility and who owns what may be a little grey.

LEASEHOLDA lease agreement will normally be found when buying a flat, apartment or maisonette, however leaseholds (although more rarely) can be applicable when buying some houses or bungalows. A lease means means that you own the dwelling for as long as the lease specifies in relation to how long you can live there as granted by the freeholder. At the end of the lease the property again becomes the possession of the freeholder. Many leases are granted from 125 to 999 years. Mortgage lenders will not be happy with short leases, check with your broker and solicitor as to criteria before spending too much. Equally it may be possable to renegotiate the lease for a longer period.

A lease will have a number of restrictions imposed as to who is responsible for maintaining and repairing different parts of the dwelling and communal areas such as communal hallways and landings at the property and any conditions you must meet as a resident. With a lease comes Ground Rent for which you must pay the owner of the land (the freeholder), usually a token amount paid each year or 1/2 yearly. Additionally you will be as stipuated under the agreement be a contributor towards maintanence which can run into many hundreds of pounds each year, along with a share of the buildings insurance. Your solicitor should check that the seller is up to date with ground rent, maintanence and insurance payments before you sign and exchange contracts. 

Existing leasehold dwellings/units can be converted to commonhold (see below) under the Commonhold and Leasehold Reform Act 2002. Further information should be obtained from your solicitor.

COMMONHOLD:  This modern type of ownership came into existence late 2004. Basically, a form of freehold for property where there are two or more units that can be owned by different people plus common areas ie communal landings, stairs and hallways. The unit/dwelling owners (ie  flats, apartments, maisonettes, some mews development dwellings etc) are individually owned but the common parts are owned by a commonhold association being a limited company as set up by the owners.

Unlike a lease commonhold dwellings do not have a fixed 'years' term, pus shared/common areas are not owned by a distant freehold as only dwelling/unit owners can have interests in the common parts.

OWNING A PROPERTY WITH OTHERS:  If you are not the sole owner of a dwelling, then both or all owners need to decide on what terms ownership will be shared which can be done in two ways being 1/ Joint Ownership/Joint Tenancy and 2/ Tenants in Common:

Joint Tenancy:  The property is held in equal shares and on the death of one of the joint owners the other becomes absolutely entitled to the whole of the property. The surviving can sell or otherwise deal with the property as sole owner. This ownership is favoured in many family relationships, ie between husband and wife.

Tenancy in Common: In this type of ownership, the shares do not need to be equal. If one owner dies, his or her share can be willed to whoever he or she wishes, or it will pass to the entitled relative if there is no Will. The share does not automatically pass to the other joint owner/s. The surviving joint owner/s may not be able to sell the property without permission, and if the property is sold will not receive the whole proceeds of the sale. This type of ownership is favoured where the parties are not married, or where the purchase money has not been supplied in equal shares.

It is possible for one joint owner to convert the ownership from joint tenancy to tenancy in common. But, both owners must consent to a change from tenancy in common to joint tenancy. Again we strongly recommend that you consult your solicitor or conveyancer for advice before proceeding with any purchase or changing how a property is owned.

CHATTEL RESIDENCE:  Covers dwellings such as Park Homes, Caravans, Boats and alike which can be a full time or part time residence and quite commonly found on a permanent agreed pitch or mooring as owned by another party such as the Site Owner in the instance of a mobile/park home. Basically you are buying or enjoying pre defined rights. Such dwellings are often financiable. For the right  to keep the chattel at its siting the site owner will normally charge a monthly or annual fee along the lines of a ground rent. The site owner may also set stipulations and restrictions. Mobile and Park Home owners are also protected under a number of Acts> link

 

Net Lawman; Suppliers of Legal Agreements and paid for advice to users of INEA. Simply press the Net Lawman logo.


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