What Exactly is a Lease?

Most flats and a few houses in England and Wales are owned under long leases, with long in this instance meaning longer than 21 years.

Because of a legal difficulty in making obligations run with successive owners of the property, the lease is a useful device as every time the property is bought and sold, all of the existing obligations in the leasehold contract are transferred to the new owner.

In shared property the leasehold contract sets out what parts of the building belong to the leaseholder (usually, but not always, these are the internal parts of the property itself). Normally the structural elements and exterior belong to the freeholder. This person is generally the freehold owner.

Generally speaking the parts of the building outside the property itself, including the ground beneath it and the space above, belong to the freeholder. The one disadvantage of this system is that a lease is a ‘time limited’ interest in land. Therefore, as time goes on the length of the lease (and the capital value) diminishes.