Since 1925, in English law, there are only two forms of legal land ownership: full ownership (freehold) and a long-term lease (leasehold). Foreign citizens can acquire real estate in the UK in full ownership or lease it for a long term. Freehold or full ownership of real estate is the ownership of a land plot and the buildings on it for a period desired by the owner with the right to fully dispose of his property. The ownership of the property is registered in the land registry. This form does not usually apply to individual apartments. There are exceptions, but they are very rare – for example, in London’s Lincoln’s Inn, where lawyers live: according to a parliamentary regulation adopted in the 19th century, ownership in this quarter can extend to plots located above or under someone else’s property (balconies, basements, etc.).
In case of long-term lease, the buyer acquires the land on the basis of a long-term lease agreement, which are 99 years in length. Long-term lease rights are acquired at a fixed price, sometimes in addition to this, a nominal rent is charged annually. The tenant can sell the house or apartment also on the terms of a lease.
As a result, the owner of the land (e.g., city government, Grosvenor Estate family trust) retains some degree of control over their land. Family trusts, which often own vast areas in London’s elite neighborhoods (such as Mayfair or Belgravia), often strive to preserve the traditional style of facades and the general appearance of buildings and therefore do not sell the buildings to full ownership, but only lease them.
Leasehold properties are mainly apartments in multi-storey buildings. Before buying real estate in England, you need to inquire about the lease term for the land plot, since the price of the purchased property depends on that term.
Leasehold property owner usually pays a “ground rent” for the land and often a service charge to building management company.
When the lease expires, the property is returned to the freehold owner. The relationship between the owner of the freehold and you (the owner of the leasehold) is typical of those that exist between a landlord and a tenant.
Some of advantages of owning leasehold properties are: if the lease period is quite long and the property is located in a popular area, there is almost no difference between leasehold and freehold, so such a property can be both a profitable investment and your main residence, which will be relatively easy to sell. In some cases, leasehold prolongation or even re-registration to freehold is possible for an additional fee. The downside to leasehold is that it has a limited life span that decreases over time. It is almost impossible to take out a mortgage on a property with a lease term less than 80 years. The owner of the freehold has the right of ownership for an unlimited period of time and owns not only the building, but also the plot of land on which it is located.
By Zainudin Makhachev