Estate agents in the UK offer leasehold land and freehold land. Do you know what the difference is? If you're wanting to acquire a piece of land it's essential you comprehend on what basis you're purchasing, as it can affect your rights in all sorts of ways.

In this guide, we'll be focussing on leasehold land. We'll explore what it is and whether it may be the right alternative for you.

What do we indicate by the term leasehold land?

In the case of leasehold land similar to property leases, the buyer does not end up being the outright owner. Instead, the purchaser buys special approval to use the land for a time period. A piece of land's ownership history, as well as its current tenure (i.e. freehold ownership vs leasehold ownership), are all included in its title deeds, a copy of which is usually held by HM Land Registry.

Leasehold ownership lengths can differ hugely. Some lease lengths may be for a 50-year duration, a 90-year period or even a 999-year duration, depending on the original lease and when it was drawn up. When the time limitation on the lease comes to an end, it can typically be extended, but this may incur legal costs.

There are advantages and disadvantages to the purchase of leasehold land. In specific situations, such as the development of affordable housing in central cities with high residential or commercial property rates, it can be of terrific benefit.

Where did the idea of leasehold land come from?

The concept of owning land and leasing it to others is not a brand-new one. It can be seen in the history books as far back as the Norman conquest, although it would have looked extremely various to how it does today.

The leasehold land model as we understand it goes back to when the 'landed gentry' owned big swathes of land or vast nation estates, offering long-term lease contracts to those wanting to farm or survive on the land. In the UK a few of the greatest landowners were (and still are) The Crown and the Church, with numerous long leases offered to allow the building of both business residential or commercial properties and homes.

Large landowners would grant long leases to designers allowing them to develop and either offer or make rental income from the land. Those landowners would then share in the income source that was ultimately gotten from any buildings erected. Still to this day, areas of London, including Regent Street and the locations around a number of the royal parks, are developed on leasehold land owned by The Crown.

It's only been given that the Second World War, when local authorities were wanting to help restore their cities and neighborhoods and develop economical housing in a hard economic duration, that this leasehold land model began to make sense.

It allows much-needed inexpensive housing advancements to be funded and developed without the debilitating up-front costs related to land purchase. And what's more, it sees a steady stream of earnings coming back into the general public coffers over the longer term.

Is renting land a good idea?

As the freeholder, the owner of the land will need to pay the expenses of purchasing the land. This might be a large amount. If you do not have readily available capital to invest, renting can be a good route to getting the right to utilize the land for whatever you wish at a portion of the preliminary expense.

Leasehold land uses more security than you might think. For the most part, a leasehold contract offers the same level of security as a freehold. The agreement you sign to acquire the lease will state the particular period of time for which the land is leased to you. During this duration, nobody can eliminate the land from you for any factor.

If you construct a home on the land you will have the very same rights over it as you would were the land freehold. You will be able to renovate, extend or alter it, offer it or rent it out without first looking for approval from the landowner. What's more, if you pass away, the ground lease can be passed on by means of your will.

You will be able to utilize your parcel of land however you desire, depending upon the terms of the lease and topic to regional preparation consent. Most agreements will allow you to set up a dwelling, business residential or commercial properties, develop something for the good of the community, or work from the land as you need to.

Once the lease duration is over, you need to deserve to restore your contract, by means of a lease extension, and continue with the arrangement you had. And it will continue to be the duty of the owner to preserve the land that he has actually rented, covering upkeep costs, service charges, administration charges etc.

And meeting the purchase price should not be an issue, there are lots of mortgage lenders that will be pleased to assist you finance the purchase as long as the lease term staying is adequate.

Who does leasehold match?

Leasing land works particularly well in some situations. If, for instance, a landowner wishes to maintain ownership of a bundle of land but not develop it themselves, they might participate in a land lease agreement with a designer. This would put the onus on the designer to construct and offer one or more homes, while the freeholder keeps ownership of the land.

In this case, the residential or commercial property owner would take pleasure in a steady earnings stream from ground lease charges and other upkeep fees.

Due to the cost and length of time it takes before a return on financial investment is seen, it can be particularly difficult for smaller sized private designers to acquire great plots of land to build on, particularly in more pricey locations such as central cities.

If designers who aren't cash-rich discover it hard to secure financing to fund the up-front purchase of a piece of land, the opportunity to lease and repay across time, lastly passing those ongoing expenses to buyers, is a tempting one.

The leasehold design offers the opportunity for councils, charities, housing cooperatives and Community Land Trusts (CLTs) - a type of neighborhood ownership - to come together and assist people on lower incomes to construct their own homes. All by decreasing or eliminating the requirement to discover the up-front capital to acquire land.

Exist any drawbacks?

While you might discover it helpful to prevent the high expense of purchase at first, paying annual ground lease charges can also be unpleasant in the long run. These charges are liable to increase in line with the regional market rate for land, and you might have little control over the increase.

When you acquire leasehold land in the very first location it is essential to check the length of time is remaining on the lease. Extensions not only require sensible time and effort, however they are likely to incur legal costs.

What's more, there is a threat your extension demand might be denied. The landowner might not want to extend the lease, maybe preferring to establish the land or use it personally in some way. If you have actually invested money to make the land suitable for function this could be hard.

As a leaseholder instead of a freeholder you will not have general control of what you can do with or on the land. Be sure to investigate what you are and aren't allowed to do according to the terms of your lease.

Feel confident, much of these risks can be mitigated by doing your research and looking for skilled legal guidance upfront.

What happens at the end of a lease?

At the end of a lease, where no extension has actually been agreed, the landowner will deserve to acquire the land and everything that has actually been built on it. Ownership is legally moved. Use Addland's guide on how to discover who owns land to discover the very best way for you to research land ownership.

Interestingly in lots of places in Europe - where leasehold is a popular technique for councils to own and rent out land and residential or commercial property - this right of foreclosure does not exist in the very same method. If the lease is not to be extended, the council will typically accept pay the outgoing leaseholder the residential or commercial property appraisal of any building that has actually been constructed on the land.

Is leasehold the ideal design for you? Addland can assist you find leasehold land for sale In the UK, conserving you time by offering you all the details you need in one location. And with information from HM Land Registry and Ordnance Survey, covering considerations from flood zones to AONBs, we can assist you build a total image of the land you're seeking to buy.

Addland makes it simple to Find, Research, Buy or Sell land. Start your land journey today.