Myself and my pertner went to see a show apartment yeterday which was quite nice inside. On the way out we got talking to another couple who alerted us to the fact that it was a leasehold apartment rather than freehold. We nodded sagely in an effort to feign knowledge, but being honest we have no idea what the differnce is. Can anyone explain the consequences of buying leasehold as opposed to freehold?
Freehold vs Leasehold
- Thread starter whackin
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A freehold is regarded as the best title; however, in an apartment develoment, title is amost always leasehold; this is so that the rules and regulations can be enforced by the management company. Usually, the freehold is owned by the management company, which is in turn owned by the apartment owners; in this case, when you buy an apartment you are buying a leashold plus a share of the freehold; This contrasts with the U.K. , where it is not unusual for the developer to hold the freehold as a "ground rent" type investment.
Just on that point - our townhouse development is on former Army/Department of Defence land and is, as far as I know, freehold and we have a management company. Does this suggest that the title of the land is held by the management company rather than the individual householders? Apart from the obligations under the management company covenant/lease (?) does this have any other implications for householders? I suppose I should retrieve my deeds from safe keeping, have a read of them and maybe consult with my conveyancing solicitor but I was just looking for a general gist on this at the moment. (Yeah - I know that I probably should have understood all this at the time of purchase but you know yourself... 
).
).Short synopsis is:
1. You cannot have a long lease of a house ( but you can of apartments, duplexes etc).
2. There is an anomaly in the law in that certain covenants and obligations in freehold transfers are likely to be unenforceable.
3. The preference therefore where you have an estate ( so that you can enforce the covenants and therefore ensure a peaceable and well kept estate) is to sell by way of long lease, thereby ensuring the enforceability.
4. Where you have houses, what can happen is that you would own the freehold of the house, but only have a leasehold interest in the common areas, services, roadways and footpaths etc, thereby ensuring the enforceability of the covenants in relation to the common areas( called a lease of easements).
However I have seen title in estates where the ownership is freehold and therefore the enforceability of certain covenants is questionable.
1. You cannot have a long lease of a house ( but you can of apartments, duplexes etc).
2. There is an anomaly in the law in that certain covenants and obligations in freehold transfers are likely to be unenforceable.
3. The preference therefore where you have an estate ( so that you can enforce the covenants and therefore ensure a peaceable and well kept estate) is to sell by way of long lease, thereby ensuring the enforceability.
4. Where you have houses, what can happen is that you would own the freehold of the house, but only have a leasehold interest in the common areas, services, roadways and footpaths etc, thereby ensuring the enforceability of the covenants in relation to the common areas( called a lease of easements).
However I have seen title in estates where the ownership is freehold and therefore the enforceability of certain covenants is questionable.
Thanks for that. I must have a look at the title deeds and related legal documentation some time to see what they say. It fascinates me that the legal enforceablility of certain covenants might be questionable when these were presumably drawn up by skilled and experienced solicitors in the first place?
ClubMan, don't forget its not so long since all property was under leasehold from the pertinent landlords in this country. Secondly, apartment blocks and estates where the services are not taken in charge by the local authority are a relatively new phenomenon. So this area is still developing. I remember as an apprentice seeing the very first title to an apartment block in a particular town, which had been purchased by my master. It was and is a very large block of apartments which mistakenly the developers solicitor sold by way of conveyance ( freehold) rather than lease. Not one of the solicitors acting in the purchases copped it, and it was only when the first solicitors started lodging for registration that the land registry rejected the conveyances as void, and every one had to go back to the drawing board and obtain leases instead. Cue red faces all around. But it was understandable, it was the first of its kind in the area!
Murphaph- 500/999 years is common.
Murphaph- 500/999 years is common.
Ah that's ok. I've seen a lot of german leases only running 99 years and that's ok for me but not much use of I want to leave it to my children! I always just assumed apartments here were freehold because nobody ever mentions the inheritance aspects. An interesting topic.
It is a "fee farm grant" and it is an odd hybrid: it is a freehold estate subject to payment of an annual rent (known as the "fee farm rent"). If I can give you an analogy, it's a bit like having the payment of an annuity charged against the land. The annual payment is rarely if ever demanded - something of an historic anachronism these days really. It's perfectly fine as a title.
A block of apartments has many floors with apartments stacked on top of each other. If you buy an apartment on the upper floors, you are buying something that is suspended in the air - held in place by bricks and mortar. It is not possible to buy the freehold of the land quite simply because there is no land to buy - there are other apartments below you rather than a patch of turf.
You can buy these out very cheaply - sometimes for less than the cost of a round of drinks! Worth looking into if you dont want the hastle of paying 2 and sixpence every third month with a full month etc.
I have a leasehold from a 1970's property with I think 5 pence annual charge that is never collected. I am entitled to buy out the leasehold via the land registry for a nominal amount which I am in the course of doing. I'm not sure it's a fee farm grant though.
No is probably a normal leasehold.
My employer had a few properties which were fee farm grant. The grants are usually to some sort of trust based in the UK. Bought them out by directly contacting the trust and agreeing a fee. Trusts are used to people buying them out and costs are minimal.