The origins of freehold and leasehold property ownership in the UK date way back to the Middle Ages. Many would argue that modern property laws still contain traces of the original Medieval system hundreds of years later.
In this article, we’ll look at the earliest legal terms to the most recent leasehold reforms, evaluating whether the latest legislation has brought us out of the Dark Ages.
Use our helpful Jargon Buster as a guide if you encounter unfamiliar terms during this text.
The Medieval Feudal System
The system of leasing land and property originates from the feudal system that governed the Middle Ages.
During this period, land ownership was a huge signifier of power. Of course, the Monarch ultimately owned all of the lands, but over the years, territories were given, sold or granted with an effective right of the freehold to individuals or public bodies.
For example, the Monarch would grant territories to Lords in return for their loyalty and service – especially military backing. Then Lords leased their land to tenants in exchange for their labour and produce.
You can find the term ‘freeholder’ in the historic Domesday Book of 1089, commissioned by William the Conqueror to survey the land.
Leasehold: Free and Unfree Tenure
Tenure is a word we still use today when discussing property ownership. The type of tenure you have determines the level of ownership you have over the property, your rights and how long you’re entitled to stay there.
In Medieval times, tenures were divided into either ‘free’ or ‘unfree’ arrangements.
A Free Tenure was the fairer of the two. Ownership was predetermined, and the property could be passed to the tenant’s heirs.
Unfree Tenures were held entirely at the landlord’s will and could be ejected at any time. The tenancy was not hereditary. Instead, it was terminated on the tenant’s death or at an earlier specified period. This kind of tenure later became known as Copyhold tenure.
20th-century Leasehold Reforms
Until the 1920s, landlords or freeholders held a dominant position over their tenants. However, legislation was introduced to regulate rent and restrict landlords from recklessly evicting tenants.
Copyhold tenures were gradually enfranchised and turned into either freeholds or leaseholds. From 1926, all remaining Copyhold land became freehold tenures.
As profits declined, landlords began offering longer leases (around 99 to 125 years) to generate revenue without losing ownership of their land, which gave way to the modern leasehold system we recognise today.
Throughout the post-war period, a large number of flats were constructed.
Freehold tenure was not possible for occupants living in a block of flats because the apartments sit on a shared plot of land. According to the law, a freehold is a right to own land with a distinct boundary on a map.
There was a rapid increase in leaseholds at this time, as they were the only way to subdivide and sell properties in multi-occupancy buildings. Even today, leasehold remains the most common method of owning a flat.
By the 1960s, many elderly leaseholders were threatened with eviction after their leases expired. The press coverage and public outcry resulted in the White Paper on Leasehold Reform which made property reverting to a landlord at the end of the lease term without compensation unjustifiable.
The Leasehold Reform Act 1967 enabled tenants the right to acquire their freehold or extend a lease on their house if they’d owned the leasehold title for the past two years.
The Landlord and Tenant Act 1987 gave leaseholders a ‘right of first refusal’ when landlords wished to sell their freehold to a third party, providing additional security for tenants.
The Leasehold Reform, Housing and Urban Development Act 1993 enabled all leaseholders to the legal entitlement to extend their leases by an additional 90 years and extinguish any ground rent, subject to certain criteria being met.
Under the Commonhold and Leasehold Reform Act 2002, the leaseholders of a block of flats had the right to collectively take over the management of their building from their landlord. This procedure was named the ‘Right to Manage’ (RTM).
The next significant reform brings us to the Leasehold Reform (Ground Rent) Act 2022.
The first phase of legislation abolished ground rent on all new leases across England and Wales. From 30 June 2022 onwards, ground rent on new leases will never be more than a ‘peppercorn’, which sets the rate to zero. As a result, tenants are less likely to pay excessive annual rents or remain tethered to properties that are too expensive to sell to a potential buyer.
At the time of publication, there is no draft legislation for the second phase, so we can only speculate. However, the ‘proposed changes’ could include the removal of marriage clauses, a 990-Year leaseholder extension and a statutory calculation to regulate the amount a leaseholder pays to a freeholder.
If this all goes ahead, the combined impact of this Act will be substantial as it should make extending a lease cheaper and more straightforward.
You can find more information about this Act in our ‘What Changes are the Government Making to the Lease Extension Process?’ article. Here we discuss the recent reforms in-depth and consider the future developments we expect to see.
Where does this leave leaseholders today?
This timeline demonstrates the Medieval feudal system’s grip on UK property law for hundreds of years. But, thankfully, we can see that by the 20th Century, there has been a push towards greater leaseholder rights and better housing security for tenants.
Although it is still possible for a lease to expire, the tenant to be evicted, and the property to revert to the freeholder, the chances are much slimmer because leases are considerably longer.
Increased Leaseholder Responsibility
That said, we mustn’t take our eyes off the ball. As landlords lose control and face depleting revenue, it’s in their interest that you do not know your rights and entitlements as a leaseholder.
With leaseholds still being the most common form of flat ownership (and even sometimes for new-build houses), we suggest bearing the following in mind:
- Be cautious about entering into short leases that will be expensive to buy, extend or sell.
- Consider extending your lease after two years of tenancy for extra security.
- Consider buying the freehold or collectively managing the freehold with other tenants in your building.
- Keep an eye on the length of your lease, and remember that 80 years is the crucial cut-off point. Below that, the lease becomes more costly to extend as you must pay the ‘marriage value’ (on top of other lease extension costs) to the freeholder.
As previously mentioned, changes to the marriage value clause may appear in the next rollout of leasehold reforms. However, for now, we can only work with The Leasehold Reform, Housing and Development Act 1993 and the reality that the longer you wait to extend your lease, the greater the likely cost of the premium you will pay to your freeholder.
For additional information about managing or extending your lease, please contact us by filling out our online form, emailing [email protected] or calling us for free on 0800 098 2770. We’d love to hear from you.
Alternatively, browse our website for further informative articles about the lease extension procedure.