Comparative Analysis: Leasehold & Freehold Ownership in UK Law

This report provides a comprehensive analysis of leasehold and freehold ownership under UK property law. It begins by contrasting the two forms of ownership, highlighting key differences such as ground rent obligations, maintenance responsibilities, and restrictions on leaseholders. The report then addresses significant concerns within the leasehold market, particularly for new build homes, including escalating ground rents and limitations on property alterations. Proposed reforms aimed at mitigating these issues, such as capping ground rents and restricting the sale of new leasehold houses, are discussed. Finally, the report offers an overview of the enfranchisement process, enabling leaseholders to purchase their freehold. Desklib offers a wide array of similar solved assignments and resources for students.

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UK Law

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Table of Contents
UK Law...........................................................................................................................................1
Introduction......................................................................................................................................2
Contrast between leasehold ownership and freehold ownership:....................................................2
Concerns regarding the leasehold market for new build homes:.....................................................4
Proposed Reforms:...........................................................................................................................5
An overview of proposed reform to the process of enfranchisement for leasehold homes:............6
Conclusion.......................................................................................................................................7
Bibliography....................................................................................................................................8

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Introduction
A lease is the making of a legal agreement through which monetary payments are made for the
purpose of utilization of a land or a building or any other property. This utilization is done for a
fixed period of time as stipulated in the agreement of the lease, and as per the rules of the
contract and the laws of the state. The property, which can be leased, can be either tangible or
intangible or movable or immovable under the laws.
Under the property laws of United Kingdom, there are two primary methods of granting of
ownership. These forms of ownership include, freehold and Leasehold. The former lays
emphasis upon the complete ownership of the property while the latter deals with the functions
of leasing the property from the freeholders under the rules and regulations stated by the
freeholders1. There are many differences between these types of ownerships. The contrast
between the two has been portrayed in the report, and which ownership is preferred more over
the other. Besides these, there are various other elements, which are added to the report for a
clear understanding of the subject2. The main issues with regard to the leasehold and the freehold
ownership are discussed. The various elements for reforming the above issues are also stated in
the report with subtle recommendations for resolving the issues. Further, a brief overview has
been granted in the report for the enfranchisement process for leasehold homes when the owner
desires to purchase the freehold is given.
Contrast between leasehold ownership and freehold ownership:
Freehold ownership means and includes that a person who owns a building upon a land for
eternal time. A name of the person who owns such a land would be present at the registration
1E. M.Letsoalo, and M. J. J. Thupana, "The repeal of the land acts: the challenge of land reform
policies in South Africa",Social Dynamics, 39(2), 2013, 298-307.
2Europese Unie, "Consolidated version of the Treaty on European Union and the Treaty on the
functioning of the European Union", 2008.

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documents of the land and he would called a freeholder. This is because a freeholder possesses
the absolute title. The key features of leasehold ownership include the lack of paying of annual
ground rent. He possesses the responsibility of taking care of his building solely. Another form
of ownership is called the leasehold ownership. There are various differences between the two. A
leasehold ownership means a taking a lease from the freeholder ownership of lease3. The
freeholder here is often referred to as the landlord. The leases undertaken under this kind of
ownership is for long period of time for instance, 120 years or up to 999 years. a leaseholder
possesses a contract with the freeholder which lays down the legal rights and obligations of the
parties from both the sides. A freeholder has the duty of controlling and protecting the common
areas of the building4. The common areas include the staircase corridors, main entrances, way to
the gardens, all the common areas of the outer and the inner portions of the building. Where the
leaseholders have the right to manage, they possess more responsibilities. In comparison with the
freeholders, the leaseholders are bound to pay the payment for maintenance and the yearly
charges of service this also includes the various charges of the insurance in the buildings.
Another comparison between the two arises in case of the paying of the annual ground rent. The
leaseholders are bound to pay the same. There are certain restrictions imposed upon the
leaseholders which the freeholders do not possess. The leaseholders would have to bide by the
rules stated by the freeholders. It is the duty of the leaseholders to follow all the rules,
regulations and the terms of contract of the lease. Otherwise he would be liable to pay damages
to the freeholder if any inconvenience caused. The freeholder is also empowered to forfeit the
lease completely5. Thus, these were the basic features of a leasehold ownership in comparison
with the freehold ownership.
There are various reasons as to how the leasehold ownership is becoming less favorable. The
value of the leaseholds are declining in the contemporary era. When the period of lease is
reduced to nil number of years then the property goes to the freeholder again. If a lease has been
3Colin Lizieri, "Property ownership, leasehold forms and industrial change", Industrial Property.
Routledge, 2018, 181-194.
4Thomas Hobbes, Thomas Hobbes: Leviathan (Longman Library of Primary Sources in Philosophy), Routledge,
2016.
5Hazel Marshall,EGLR 2013 V3, Estates Gazette, 2017.

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granted for 10 years, after the completion of this period, the property and the ownership would
revert back to the freeholder. When the lease are for shorter periods, then the worth of the lease
also decreases. Moreover, if the above features of the leasehold ownership are taken into account
from the comparison section, there would be various causes listed for the declining condition of
the leasehold ownership6. When the leasehold is for a longer period, the worth can be better
understood. The value of the property increases with the passage of the time. It would be
beneficial of both the freeholder and the leaseholder.
Leasehold ownership was very common in the earlier times, but it has been decreasing steadily.
The recent trend refers to the avoiding of a leasehold and more emphasis upon the freehold.
Leases for a period below 90 years could create problems for the leaseholders and the
freeholders.
Concerns regarding the leasehold market for new build homes:
There are various challenges cropping up in the leasehold market for the building of new houses,
buildings and flats in the contemporary era. While the leasehold buildings are at the same level
with the course in the United Kingdom and it does not create challenges very often. But there are
diverse challenges arising from the leasehold houses and they are causing various problems. As
per the survey of the National Association of Estate Agents, (NAEA) around 93.5% of the
people who has purchase a leasehold how now wonder why they did so7. This is because of the
rising issues arising from the leasehold ownerships8. The government of United Kingdom has
stated that a ban would e imposed upon the sale of new leasehold without any legal justification.
The biggest concerns that arise in the leasehold market for the building of new homes is rise of
ground rents considerably. Often, the costs are set at $200 to $400 per anum. These rates further
increase with the passage of time and sometimes just doubles its original rates in the coming
6Mats Morell, "Farmland: ownership or leasehold, inheritance or purchase", 2011, 56-74.
7Law Commission, “Leasehold home ownership: buying your lease or extending your lease”,
Consultation paper, 2018, 238.
8Alison Wallace, "Shared ownership: satisfying ambitions for homeownership?",International
Journal of Housing Policy, 12(2), 2012, 205-226.

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decades. According to the survey of NAEA Propertymark, around 49% of the persons are not
known of the increasing phenomena of the rents associated, with their respective properties9.
Another concern related is the total sum that the freeholders can charge for the alterations made
by the leaseholders in their property which has been leased. The latest statistics from the law of
property of United Kingdom refers that the leaseholders face problems with his regard especially
during the case when the leases are for a short term10. The leaseholders are forced to pay in
aplenty for the alterations in their buildings but they cannot utilize the same for a very long
period.
Despite the homes are mostly let out for period of 999 years, it is often known as practically
freehold. There are various regulations placed upon them. There arises the lack of independence
among the conveyances. The transmission of the property is lost. The leaseholders become
completely dependent upon the freeholders choice11.
There are various problems with regard to the sale of the houses upon a household basis. The
survey of NAEA property mark report that the leaseholders now regret the lease they undertook.
A major portion of the population is under the dilemma of how to sell the houses upon a
household basis. This is because the lease does not to end.
The mortgage upon a leasehold property also becomes a bit difficult. The terms of the lease are
the major factors upon which a mortgage is dependant. The shorter the period of lease the greater
becomes the difficulty of getting a mortgage. The maximum mortgage lenders are reluctant to
give properties on mortgage below the period of 70 years12. Quite often, they desire to increase
9Cristian Badarinza and Tarun Ramadorai, "Long-run discounting: Evidence from the uk
leasehold valuation tribunal", 2015.
10Nick Hopkins, “Leasehold enfranchisement”, New Law Journal, 2018, 168(7805), 14
11M. J.Best, et al., "The Joint UK Land Environment Simulator (JULES), model description–Part
1: energy and water fluxes" Geoscientific Model Development, 4(3), 2011, 677-699.
12 Robert Goff and Gareth Jones,The Law of Restitution, vol. 2, Chaps.

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the time specified up to a period of 40 more years, after the completion of the term of the
mortgage. This is done to avoid any scratch to the value of the property which has been leased
out. Due to this, the rates in the mortgage often arises13. The loan to value available for this is the
ratio of how much money is taken. The lenders have a tendency to propose for the decrease in
the rates of the value of the household properties under mortgage.
Proposed Reforms:
The proposed for the issues and concerns regarding the leasehold market for new build homes
are stated below:
1) The initial reform proposed is the decrease in the ground rents to a reasonable value of
the leasehold properties. The ground rents increase for the leases with the passage of
time. To add to this, it increases to the double in every decade. These cause serious issues
for the leaseholders as against the freeholders. The best way of resolving this issue is by
the implementation of the reduction in the ground rents in the leasehold properties.
Unlike freeholders, the leaseholders do not own the properties14. It would be unfair on
them to pay increased rents throughout the long periods of tenancy. There is absence of
any advantage to the leaseholders in paying the rents. The ground rents thus should
increase alarmingly like it does15. The ground rents should be paid at nominal prices as
specified in the legislations. The nominal prices means the reasonable costs of the rents to
be paid by the leaseholders to the freeholders for the property which has been leased by
them. This would be very helpful for the leaseholders as it would not pinch their pockets.
2) Another reform to check the issues arising from the leasehold for new build homes
includes the limiting of sale of new build leasehold houses and help to buy. The
13Philippe Bracke, Edward W. Pinchbeck, and James Wyatt, "The time value of housing:
Historical evidence on discount rates", The Economic Journal, 2017.
14Sarah Cole, "Virtual Friend Fires Employee",Naked Law, 1, 2009.
15Susan Brightand Nicholas Hopkins. "Home, meaning and identity: Learning from the English
model of shared ownership", Housing, Theory and Society, 28(4), 2011, 377-397.

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procedure of the leaseholds can be very time consuming. It becomes very essential for
making improvements in the buying and the selling of the leasehold properties.
According to NAEA, 93% of the leaseholders agreed to manage and assign agents with
the responsibility of selling the properties. The government had imposed a ban upon the
unjustified sales. The assignment of responsibility upon these agents could be made very
helpful in the buying of the leasehold properties. This reform possesses plenty of
advantages as well. Fixing of specified rates and specified timings are required for the
smooth functioning of the helping to buy of the leased properties. This also saves
pecuniary interests of the parties under this contract16. A reasonable structure of the
payment of remuneration to these agents can be very helpful in the determination of the
leasehold properties as well.
3) Another reform which should be initiated for the purpose of resolving the issues of
leasehold market for new build homes is the creation of land obligations to replace the
positive freehold covenants. The freehold covenants have the sole target of providing
benefits to the freeholders. The leaseholders are under a disadvantage for these
covenants. Hence, the making and the formulation of new land obligations is needed to
be done by the legislatures. This would provide benefits to the leaseholders as well and
the issues and concerns faced by them would be resolved to a great extent. The
replacement of the freehold covenants would be beneficial for the owners of leasehold
properties.
Thus, the above were the various reforms proposed to deal with the issues concerned with
leasehold for new build homes.
An overview of proposed reform to the process of enfranchisement for leasehold homes
The procedure of enfranchisement for leasehold homes comes into operation when, after
examination of the terms of the lease, the lease is either increased for a longer period of time or
the share in the leasehold property is bought. As per the Leasehold Reform , Housing and Urban
16Sheila Farrell, "The ownership and management structure of container terminal concessions."
Maritime Policy & Management, 39(1), 2012, 7-26.

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Development act of 1993, the government plays a very active role in providing the leaseholders a
security against the short leases17. This is done with the help of the increasing of the time for
which the property has been leased for.
An overview of the proposed reforms to the procedure of enfranchisement for the leasehold
homes include the following: a universal right for the increase of the lease must be provided to
all the leaseholders irrespective of the fact whether own any kind of home. A right should be
granted to the leaseholders for the getting of freehold ownership of a building either as an
individual or upon a collective basis. Another right should b conferred upon the leaseholders
who are new to this. This right includes the permission to be involved in the former collective
freehold acquirements or the right to do the on a specified date in the near future18.
The proposed reform also aims to make the procedure for enfranchisement in an easier way. The
elements included in the procedure of enfranchisement should be made simpler. The addition of
the idea of ‘residential unit’ should clear the differences between the flats and the houses19. The
application of the procedure of enfranchisement consists of a two way procedure and it is made
available to the leaseholder. The first stage includes, the applicability of the increase of the lease
for a longer period and whether the leaseholder possesses an extra right of getting such freehold
property on an individual or through a collective basis20. The cutting of the essential ingredients
17Kellie Jones, “Practitioner page: Tackling Unfair Practices in the Leasehold Market - a
consultation paper”, Landlord & Tenant Review, 2017, 21(5), 204-207.
18Laura German, George Schoneveld, and Esther Mwangi, "Contemporary processes of large-
scale land acquisition in Sub-Saharan Africa: legal deficiency or elite capture of the rule of
law?", World Development, 48, 2013, 1-18.
19Graham Greenleaf, "The global development of free access to legal information." A History of
Legal Informatics, 9(1), 2010, 53.
20John AGGriffith,"The common law and the political constitution",Law Quarterly Review, 117,
Jan 2001, 42-67.

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is dependant upon the pecuniary factors of the terms of contract made for the lease. There is a
permitted level of increase, about 25% of the entire freehold ownership of the lease. It would
very easy if a single kind of procedure was adopted for the lease irrespective of the
enfranchisement procedure of the leasehold homes. Leaseholders thus, possess a right legally
under the Leasehold Reform Act of 1967 to purchase the freehold of their irrespective houses
upon the fulfillment of certain important conditions. On an alternative basis, it is permissible that
the leaseholder can make negotiations with the freeholder in a cordial way to purchase the
freehold through agreements21. The basic purpose of these rights is to provide the tenants to be
consistent in their operations with regard to the residential properties under their usage. It
permits the leaseholders to maintain the value of the sums and with their capacity to mortgage
the same residential home. An overview of the detailed procedures of the enfranchisement of the
leasehold homes includes strict deadlines and an easier process. It is recommended that the
procedure should be made in a single method.
Conclusion
After a close perusal of the above facts stated in the report, it can be concluded that among the
two established forms of ownership, as per the laws of United Kingdom, the freehold ownership
holds a more popular position than the leasehold ownership. This is purely because of the issues
which have arisen from the leasehold type of ownership. There are various recommendations
associated with the same issues in order to resolve the disputes arising due to them. The reform
suggested for the enfranchisement of the lease hold homes can be proved to be very effective in
the long run.
21Prosper B.Matondiand Marleen Dekker, "Land Rights and Tenure Security in Zimbabwe’s Post
Fast Track Land Reform Programme",A Synthesis report for LandAc. Project ID WS 320005(3),
2011.

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Bibliography
Badarinza, Cristian, and Tarun Ramadorai, "Long-run discounting: Evidence from the uk
leasehold valuation tribunal", 2015.
Best, M. J., et al., "The Joint UK Land Environment Simulator (JULES), model description–Part
1: energy and water fluxes" Geoscientific Model Development, 4(3), 2011, 677-699.
Bracke, Philippe, Edward W. Pinchbeck, and James Wyatt, "The time value of housing:
Historical evidence on discount rates", The Economic Journal, 2017.
Bright, Susan, and Nicholas Hopkins. "Home, meaning and identity: Learning from the English
model of shared ownership", Housing, Theory and Society, 28(4), 2011, 377-397.
Cole, Sarah. "Virtual Friend Fires Employee." Naked Law 1 (2009).
Farrell, Sheila, "The ownership and management structure of container terminal concessions."
Maritime Policy & Management, 39(1), 2012, 7-26.
German, Laura, George Schoneveld, and Esther Mwangi, "Contemporary processes of large-
scale land acquisition in Sub-Saharan Africa: legal deficiency or elite capture of the rule of
law?", World Development, 48, 2013, 1-18.
Goff, Robert, and Gareth Jones. The Law of Restitution. Vol. 2. Chaps.
Greenleaf, Graham. "The global development of free access to legal information." A History of
Legal Informatics 9.1 (2010): 53.
Griffith, John AG. "The common law and the political constitution." Law Quarterly Review
117.Jan (2001): 42-67.
Hobbes, Thomas. Thomas Hobbes: Leviathan (Longman Library of Primary Sources in
Philosophy). Routledge, 2016.
Hopkins, Nick, “Leasehold enfranchisement”, New Law Journal, 2018, 168(7805), 14

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Jones, Kellie, “Practitioner page: Tackling Unfair Practices in the Leasehold Market - a
consultation paper”, Landlord & Tenant Review, 2017, 21(5), 204-207.
Law Commission, “Leasehold home ownership: buying your lease or extending your lease”,
Consultation paper, 2018, 238.
Letsoalo, E. M., and M. J. J. Thupana, "The repeal of the land acts: the challenge of land reform
policies in South Africa",Social Dynamics, 39(2), 2013, 298-307.
Lizieri, Colin, "Property ownership, leasehold forms and industrial change", Industrial Property.
Routledge, 2018, 181-194.
Marshall, Hazel,EGLR 2013 V3, Estates Gazette, 2017.
Matondi, Prosper B., and Marleen Dekker, "Land Rights and Tenure Security in Zimbabwe’s
Post Fast Track Land Reform Programme",A Synthesis report for LandAc. Project ID WS
320005(3), 2011.
Morell, Mats, "Farmland: ownership or leasehold, inheritance or purchase", 2011, 56-74.
Unie, Europese. "Consolidated version of the Treaty on European Union and the Treaty on the
functioning of the European Union." (2008).
Wallace, Alison, "Shared ownership: satisfying ambitions for homeownership?",International
Journal of Housing Policy, 12(2), 2012, 205-226.