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PROPERTY LAW
Types of ownership
Freehold
• Non-time limited interest which effectively represents
absolute ownership of the land itself, the subsoil below it, the
airspace above it and any buildings constructed on it.
• Transfer of a freehold interest operates as a statutory trigger
event requiring registration at HM Land Registry.
Common hold
• An alternative form of freehold land ownership introduced
by statute in 2004 but rarely encountered in practice it
provides for freehold ownership of an individual unit within
a larger freehold development (such as a unit within an
industrial estate).
Leasehold
Long leasehold
• Used by freehold landowners to maintain the integrity of
their estates whilst generating a capital return; from the
perspective of long leasehold tenants long leases are valuable
assets and “owning” a long lease is often considered akin to
owning a “virtual freehold” in the relevant property.
• Typically the term of a long lease will be for 99, 125 or even
999 years and a price (“premium”) paid for its grant.
• Usually a negligible rent payable (as a “premium” will have
been paid) although in the commercial arena there may be
an element of gearing requiring the long leasehold tenant to
pay an agreed percentage of the annual income received from
occupiers to the freeholder.
• Generally transferable to third parties by assignment or
underletting although in some instances the consent of the
freeholder may be required.
• In the commercial sector alterations are often permitted
without the consent of the freeholder.
• Whilst the freeholder will have a right to terminate (“forfeit”)
the lease if the long leasehold tenant breaches its obligations
in the lease in practice there are a number of statutory
protections to relief from forfeiture to provide the tenant with
protection.
• Subject to mandatory registration at HM Land Registry.
Occupational leases (commercial)
• Used by freehold or long leasehold owners to generate an
income stream.
• Historically leases tended to be granted for 25 years however
recent market research suggests that the average lease term
has now dipped significantly below 10 years.
• Usually an open market rent is payable (quarterly in advance)
and the lease will provide for there to be an upwards only
rent review to the market rent every five years. Fixed rent and
index-linked increases are, however, becoming more common.
• In addition to paying the rent the tenant will generally be
responsible for covering the full costs of repair, reinstatement,
maintenance and insurance of the property.
• The lease will restrict the tenant’s right to assign, underlet,
use and alter the property, often requiring the owner’s
consent before such actions can be undertaken.
• Tenants occupying property for the purposes of their business
have an automatic statutory right to renew their lease (at
market rent) on expiry unless that right has been excluded
before the original lease was granted. If the lease has not been
“contracted out” of the security of tenure regime the owner
can only resist the grant of the renewal lease on a limited
number of grounds.
• Leases that are registrable at HM Land Registry (ie granted for
more than 7 years) must contain certain prescribed clauses.
Occupational leases (residential)
• Short term residential leases should be distinguished from
long residential leases which, as noted above, are typically
granted for terms ranging from 99 to 125 years at a premium
reserving a nominal ground rent.
• There are a number of different types of short term residential
leases available, a proportion of which are subject to statutory
regimes which offer significant protection to the residential
tenant both in terms of security of tenure and rent control.
• Generally speaking there is no requirement to register short
term residential tenancies at HM Land Registry.
Rights affecting ownership
Easement
• A right which benefits one piece of (dominant) land and
burdens another (servient) piece of land, note in this context
“land” includes buildings. The two pieces of land affected
must be in different ownership.
• A legal easement must either take effect as a right “in fee
simple” or be granted for a fixed term and if it concerns
registered land must be registered at HM Land Registry.
• Interference with an easement gives rise to an action for
private nuisance.
Mortgage
• A type of security.
• Whilst a charge (by way of legal mortgage) over property
does not operate to transfer title to the property to the lender,
it creates a legal interest in the property and affords the
lender certain rights including a statutory power of sale in the
event of borrower default (as the statutory powers are fairly
limited the lender will look to extend them under the terms of
the security documentation).
• Must be created by “deed” and, in the case of registered land,
registered at HM Land Registry.
Rentcharge
• A means of providing for the enforcement of “positive
covenants” or for securing the recovery of costs for the
provision of services or the carrying out of maintenance or
repairs.
Contractual rights
• A variety of other contractual rights affecting land can also
be created such as option/pre-emption rights and licences to
occupy.
• One key category of rights to which property can be subject are
restrictive covenants. They affect freehold land and represent
a documented agreement by an owner to restrict the use and
enjoyment of its land in some way for the benefit of another’s
land. Depending on the drafting of the covenant it may be
enforceable not only as between the original contracting
parties but also by their respective successors in title.
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Investors Guide to Europe 2015