Conveyancing: leasehold title

Buying a property

When you buy a property, you are buying the legal ‘title’ to the property. This means you are paying for the property along with all legal rights and responsibilities that come with it. However, the quality of title you will have varies depending on the nature of the existing legal title to the property.

If you are buying a leasehold property, your title on completion will be registered at HM Land Registry and is guaranteed by the state. Therefore, when you are buying property, you will need to know what quality of title you will own on completion.

Leasehold property

Often, when someone buys property they buy the freehold title. This means they will own the property outright and will be subject to very little restriction on the use of the land. Their title will be registered at the Land Registry with ‘absolute’ freehold title.

When you buy a leasehold property, for example, a flat or a newbuild on a modern housing estate, you will buy the property subject to the lease. Ordinarily, your title will be registered at the Land Registry with ‘absolute’ leasehold title. Typically, the freeholder (who owns the lease) will be registered with absolute freehold title of the property.

The advantage of selling properties subject to a lease is that the freeholder then retains some form of control over the property. For example, ensuring a block of flats is maintained to the same standard; or ensuring the frontages of an estate of newbuilds is kept uniformly tidy and maintained.

Rights and responsibilities

If you buy leasehold property, you are effectively buying the right to occupy the property for a period of time, as set out in the lease. The lease will typically grant extensive rights over the property and land, such as access rights; and obligations in respect of the land, such as maintaining the property, payment of ground rent (and any service charges or maintenance fees for the upkeep of the property), and so on.

The lease will be for a finite period of time, usually 99 years or more. A lease with fewer than 60 years is considered riskier for mortgage companies, therefore it is common to negotiate a lease extension when necessary.

The lease will also restrict what you can do to/with the property; for example, prohibiting any structural changes to the building, and not carrying on a trade or business from the property.

Registry

On completion, the Land Registry will register the details of the property title you have bought. With leasehold properties, the Land Registry will usually register the title with absolute or good leasehold title.

In rare cases, qualified or possessory leasehold title will be granted – your solicitor will advise you if these apply in your case.

Absolute leasehold

The title registered will be absolute leasehold where there is no defect in title, for instance, if consent cannot be obtained from the freeholder. This is the best form of title and guarantees you, the registered proprietor, against claims from third parties. Typically, absolute leasehold title will be registered if the freeholder’s (the landlord) title is registered with freehold absolute title at the Land Registry.

Good leasehold

The title granted by the Land Registry will be good leasehold title if there is a title defect, for instance, if the freeholder’s title is not registered with absolute title. This means that there is no guarantee against the risk of a third party claim against your title. In reality, good leasehold title should be unproblematic unless there is a problem with the landlord’s own title.

Good leasehold title can be upgraded to absolute leasehold if you can provide the Land Registry with the landlord’s title and (if they are not the freeholder), title to any other absolute freehold reversionary titles up to and including the freeholder.