Here we will explain the different tenures and what they mean to a buyer and property owner.
If you've been searching for property recently, you may have noticed the property listings now have to note the tenure.
This new rule ensures that prospective buyers know a property's tenure BEFORE viewing it. It's been implemented because the tenure of a property is considered a material fact that could impact your decision to buy.
But, unless you have owned a slightly more 'quirky' property, you might be unsure of what tenure is.
So, here we will explain the different tenures and what they mean to a buyer and property owner.
What is tenure?
- Tenure is the name given to the type of ownership of a property or land.
Different types of tenure?
- Freehold. You own both the property and the land beneath it. This means that the property owner owns the physical property and the ground that the property sits upon. In theory, this would mean that if you own a property, you also own all of the land below it, to the earth's centre. If your house was destroyed, you would still own the plot to rebuild the property.
- Leasehold. You own the property, but not the land beneath it. You lease the land from the freeholder. In theory, if the property fell down, you would be paid out for the property's value from the insurance, but you would not own the land. There is usually a rent payment with leasehold properties made to the freeholder as you rent the earth below the property. There needs to be a payment, but often the lease agreements are for 999 years and have what is called a 'peppercorn rent', which is a nominal amount to make the lease an actual lease.
- Flying freehold - quite unusual and only really found in older properties that have changed the boundary line at some point in history. A large building divided up into smaller properties often has areas that are not directly separated. A flying freehold is where a freehold property has a portion of the building that goes above or over a neighbouring property. Think, for example, about properties in a terrace with a passage to give access to the rear. There will often be a room above that passage. The area above the passage is a flying freehold because it is 'owned' in the freehold fashion but doesn't actually 'touch' the ground.
- Commonhold - Commonhold is the newest way of owning property, a type of tenure that was only introduced in the last decade and applies to flats or apartment blocks. It's estimated that fewer than 50 blocks of flats across England and Wales are commonhold properties. Commonhold ownership means the freeholders each own a share of the land beneath the building. Also known as a shared freehold.
- Enfranchisement - in exceptional circumstances, the leaseholders can collectively purchase the freehold from the freeholder. If 50% of the leaseholders agree, the leasehold can be enfranchised.
You are probably thinking, "How does this affect me?" When buying a new property, you need to know precisely what you are buying.
Is there are leasehold agreement that you'll need to adhere to?
Are there ongoing fees that you will need to pay for the duration of the ownership of the property?
Your mortgage lender will want to know what they're lending on. They'll be especially interested in leaseholds and the lease agreement, particularly the remaining years. The years left on a lease must far exceed the mortgage term.
Buying a property is great, but there's a lot to consider.
This is why we employ a solicitor to handle the legal process. Their job is to ensure that the property you buy will not negatively affect you in the future.
You, of course, need to know if there are any lease conditions or payments you'll need to consider throughout your ownership. Also, if you sell in the future, you will want to know that you can and that a sale will not be hindered by the tenure of the property.
If you have questions about tenure and ownership of property, get in touch with our experts today.