Investor Guide to Europe 2014
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TYPES of oWnERSHIP
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freehold
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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.
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Transfer of a freehold interest operates as a statutory trigger
event requiring registration at HM Land Registry.
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Commonhold
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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 free-
hold development (such as a unit within an industrial estate).
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Leasehold
Long leasehold
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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.
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Typically the term of a long lease will be for 99, 125 or even
999 years and a price («premium») paid for its grant.
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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 under-
letting although in some instances the consent of the freehol-
der may be required.
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In the commercial sector alterations are often permitted wit-
hout the consent of the freeholder.
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Whilst the freeholder will have a right to terminate («forfeit»)
the lease if the long leasehold tenant breaches its obliga-
tions in the lease in practice there are a number of statutory
protections to relief from forfeiture to provide the tenant with
protection.
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Subject to mandatory registration at HM Land Registry.
occupational leases (commercial)
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Used by freehold or long leasehold owners to generate an
income stream.
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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.
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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.
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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.
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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.
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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.
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Leases that are registrable at HM Land Registry (ie granted for
more than 7 years) must contain certain prescribed clauses.
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A different regime applies to residential property.
RIGHTS affECTInG oWnERSHIP
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Easement
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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.
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A legal easement must either take effect as a right «in fee
simple» or be granted for a fixed term and if it concerns regis-
tered land must be registered at HM Land Registry.
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Interference with an easement gives rise to an action for
private nuisance.
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Mortgage
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A type of security.
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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).
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Must be created by «deed» and, in the case of registered land,
registered at HM Land Registry.
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Rentcharge
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A means of providing for the enforcement of «positive cove-
nants» or for securing the recovery of costs for the provision
of services or the carrying out of maintenance or repairs.
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Contractual rights
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A variety of other contractual rights affecting land can also
be created such as option/pre-emption rights and licences to
occupy.
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One key category of rights to which property can be sub-
ject 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 contrac-
ting parties but also by their respective successors in title.
PRoPERTY LaW
