The person who buys a piece of land is known as a freeholder. This title confers complete ownership of the land and the buildings on it until they either sell the land on or leave it to someone else when they die.
Many people buy individual flats that are part of a purpose-built block. They will normally hold a lease for a certain period of time. They are allowed to occupy the flat during that time. They can sell the lease on the flat within that time period and pass on the remainder of the time to the new leaseholder.
For example:
A flat is bought on a leasehold in 1999. The term of the lease was 99 years when originally granted in 1955. In 1999 the outstanding term was 55 years.
A person in this position are usually regarded as owning the property outright. In reality they are in a similar legal position to a weekly tenant in the sense that they pay a ground rent and service charges to a higher landlord (the freeholder) for maintenance, services, insurance and management of the whole building (which includes their flat) and are the leaseholder of the freeholder are bound by the terms of the lease.
If the leaseholder then lets out the flat they must ensure that they fulfil the terms and conditions of the tenancy agreement between themselves and THEIR tenant. Depending on when they moved in these tenants will be tenants under the Rent Act 1977 or the Housing Acts 1988 or 1996. Certain conditions of the lease with the freeholder will apply to the tenancy usually relating to the common parts of the building which remain in the ownership of the freeholder.
Problems may arise for the tenant when repairs to the structure are needed (such as replacing windows). The Assured tenant will expect his landlord to effect repairs (Section 11 Landlord & Tenant Act 1985). The landlord who is the leaseholder of the property will expect HIS landlord (i.e. the freeholder) to undertake this kind of repair as specified by his lease.
If the tenant cannot get the repairs done he may need to sue the landlord, who in turn will need to pursue the freeholder. This can be a lengthy process for the tenant and they might need to approach the Environmental Health (Private Sector Housing) department who have the power (after inspecting the problem) to get the repairs done.
This complex freehold/leasehold system is currently undergoing reform with a new tenure called commonhold that will bring increased rights for existing long leaseholders.
The latest position can be confirmed by checking www.letmatch.co.uk
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