Estate agents in the UK deal leasehold land and freehold land. Do you know what the difference is? If you're aiming to buy a piece of land it's vital you understand on what basis you're buying, as it can affect your rights in all sorts of ways.

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

What do we mean by the term leasehold land?

In the case of leasehold land similar to domestic leases, the buyer does not end up being the outright owner. Instead, the purchaser buys exclusive consent to use the land for a period of time. A piece of land's ownership history, along with its present tenure (i.e. freehold ownership vs leasehold ownership), are all included in its title deeds, a copy of which is generally held by HM Land Registry.

Leasehold ownership lengths can differ hugely. Some lease lengths might be for a 50-year duration, a 90-year duration or even a 999-year period, depending upon the initial lease and when it was drawn up. When the time limitation on the lease concerns an end, it can generally be extended, but this may sustain legal costs.

There are pros and cons to the purchase of leasehold land. In specific situations, such as the creation of inexpensive housing in central cities with high residential or commercial property prices, it can be of fantastic advantage.

Where did the concept of leasehold land come from?

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

The leasehold land design as we understand it goes back to when the 'landed gentry' owned big swathes of land or vast nation estates, using long-lasting lease contracts to those wishing to farm or reside on the land. In the UK some of the biggest landowners were (and still are) The Crown and the Church, with numerous long leases offered to permit the structure of both business residential or commercial properties and houses.

Large landowners would grant long leases to developers allowing them to develop and either sell or earn rental earnings from the land. Those landowners would then share in the income that was eventually gotten from any structures put up. Still to this day, areas of London, including Regent Street and the locations around much of the royal parks, are constructed on leasehold land owned by The Crown.

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

It allows much-needed cost effective housing developments to be funded and built without the debilitating up-front expenses connected with land purchase. And what's more, it sees a steady stream of income coming back into the general public coffers over the longer term.

Is renting land an excellent idea?

As the freeholder, the owner of the land will require to pay the costs of acquiring the land. This could be a large amount. If you do not have readily available capital to invest, renting can be a great route to acquiring the right to use the land for whatever you wish at a portion of the preliminary cost.

Leasehold land offers more security than you might think. In a lot of cases, a leasehold contract uses the very same level of security as a freehold. The agreement you sign to acquire the lease will specify the specific time period for which the land is leased to you. During this duration, no one can eliminate the land from you for any factor.

If you develop a house on the land you will have the very same rights over it as you would were the land freehold. You will have the ability to renovate, extend or alter it, offer it or lease it out without first seeking approval from the landowner. What's more, if you die, the ground lease can be passed on via your will.

You will be able to use your parcel of land nevertheless you want, depending on the terms of the lease and subject to local preparation approval. Most agreements will allow you to erect a residence, business residential or commercial properties, construct something for the good of the neighborhood, or work from the land as you need to.

Once the lease period is over, you need to can restore your contract, by means of a lease extension, and continue with the plan you had. And it will continue to be the task of the owner to preserve the land that he has actually rented, covering upkeep expenses, service fee, administration charges and so on.

And meeting the purchase rate should not be an issue, there are numerous mortgage lending institutions that will enjoy to assist you finance the purchase as long as the lease term staying is appropriate.

Who does leasehold suit?

Leasing land works specifically well in some situations. If, for instance, a landowner desires to retain ownership of a package of land however not establish it themselves, they could participate in a land lease contract with a designer. This would put the onus on the developer to develop and offer several homes, while the freeholder maintains ownership of the land.

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

Due to the expense and length of time it takes before a roi is seen, it can be particularly tough for smaller sized private developers to acquire great plots of land to construct on, particularly in more costly locations such as central cities.

If developers who aren't cash-rich find it tough to protect finance to money the up-front purchase of a piece of land, the chance to rent and pay back throughout time, finally passing those ongoing costs to buyers, is a tempting one.

The leasehold design offers the chance for councils, charities, housing cooperatives and Community Land Trusts (CLTs) - a type of community ownership - to come together and assist individuals on lower earnings to construct their own homes. All by lowering or getting rid of the need to discover the up-front capital to buy land.

Are there any downsides?

While you might discover it advantageous to prevent the high expense of purchase at first, paying annual ground rent charges can also hurt in the long run. These charges are responsible to rise in line with the regional market rate for land, and you might have little control over the boost.

When you buy leasehold land in the very first location it is very important to examine how long is staying on the lease. Extensions not just require reasonable effort and time, but they are likely to sustain legal fees.

What's more, there is a risk your extension request might be rejected. The landowner may not wish to extend the lease, perhaps preferring to establish the land or utilize it personally in some way. If you've invested money to make the land suitable for function this could be difficult.

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

Feel confident, a number of these dangers can be reduced by doing your research and seeking 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 take possession of the land and whatever that has been constructed on it. Ownership is lawfully moved. Use Addland's guide on how to find who owns land to find the best method for you to research study land ownership.

Interestingly in lots of places in Europe - where leasehold is a popular method for councils to own and rent out land and residential or commercial property - this right of foreclosure doesn't exist in the same method. If the lease is not to be extended, the council will usually accept pay the outbound leaseholder the residential or commercial property evaluation of any structure that has been built on the land.

Is leasehold the ideal design for you? Addland can help you discover leasehold land for sale In the UK, conserving you time by offering you all the details you need in one place. And with data from HM Land Registry and Ordnance Survey, covering considerations from flood zones to AONBs, we can assist you construct a complete photo of the land you're seeking to acquire.

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