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Estate agents in the UK offer leasehold land and freehold land. Do you know what the difference is? If you're seeking to buy a piece of land it's important you understand on what basis you're buying, as it can impact 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 might be the right option for you.

What do we mean by the term leasehold land?

When it comes to leasehold land much like domestic leases, the buyer does not end up being the straight-out owner. Instead, the buyer purchases exclusive consent to use the land for a time period. A piece of land's ownership history, along with its existing period (i.e. freehold ownership vs leasehold ownership), are all included in its title deeds, a copy of which is normally held by HM Land Registry.

Leasehold ownership lengths can vary wildly. Some lease lengths may be for a 50-year duration, a 90-year period or even a 999-year duration, depending upon the initial lease and when it was drawn up. When the time limitation on the lease comes to an end, it can typically be extended, however this may sustain legal costs.

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

Where did the concept of leasehold land come from?

The idea of owning land and renting 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 really various to how it does today.

The leasehold land model as we understand it dates back to when the 'landed gentry' owned huge swathes of land or large country estates, providing long-term lease contracts to those wanting to farm or live on the land. In the UK a few of the most significant landowners were (and still are) The Crown and the Church, with many long leases offered to permit the building of both industrial residential or commercial properties and houses.

Large landowners would give long leases to developers permitting them to establish and either sell or earn rental income from the land. Those landowners would then share in the source of earnings that was ultimately gotten from any structures erected. Still to this day, locations of London, including Regent Street and the areas around much of the royal parks, are built on leasehold land owned by The Crown.

It's just been given that the Second World War, when local authorities were wanting to assist rebuild their cities and neighborhoods and develop economical housing in a hard financial duration, that this leasehold land design began to make good sense.

It permits much-needed affordable housing developments to be funded and built without the crippling up-front expenses associated with land purchase. And what's more, it sees a stable stream of income coming back into the general public coffers over the longer term.

Is leasing land an excellent idea?

As the freeholder, the owner of the land will require to pay the expenses of acquiring the land. This might be a large amount. If you do not have available capital to invest, renting can be a good route to gaining the right to utilize the land for whatever you want at a portion of the initial cost.

Leasehold land provides more security than you may believe. Most of the times, a leasehold contract provides the exact same level of security as a freehold. The agreement you sign to buy the lease will mention the particular time period for which the land is leased to you. During this duration, no one can eliminate the land from you for any reason.

If you develop a house on the land you will have the same rights over it as you would were the land freehold. You will have the ability to renovate, extend or alter it, sell it or lease it out without very first seeking 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 use your parcel of land nevertheless you want, depending upon the terms of the lease and subject to regional planning permission. Most arrangements will enable you to put up a residence, industrial residential or commercial properties, construct something for the good of the community, or work from the land as you require to.

Once the lease duration is over, you must can restore your arrangement, via a lease extension, and continue with the plan you had. And it will continue to be the duty of the owner to preserve the land that he has actually rented, covering maintenance expenses, service fee, administration charges etc.

And fulfilling the purchase cost ought to not be an issue, there are lots of mortgage lending institutions that will be happy to help you finance the purchase as long as the lease term staying is appropriate.

Who does leasehold fit?

Leasing land works specifically well in some situations. If, for example, a landowner wants to maintain ownership of a plan of land but not establish it themselves, they might participate in a land lease contract with a developer. This would put the onus on the designer to develop and sell one or more homes, while the freeholder retains ownership of the land.

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

Due to the expenditure and length of time it takes before a return on investment is seen, it can be especially hard for smaller personal developers to get good plots of land to develop on, specifically in more pricey locations such as inner cities.

If designers who aren't cash-rich discover it hard to protect financing to fund the up-front purchase of a piece of land, the opportunity to rent and pay back across time, lastly passing those continuous costs to purchasers, is an one.

The leasehold model provides the opportunity for councils, charities, housing cooperatives and Community Land Trusts (CLTs) - a form of neighborhood ownership - to come together and assist individuals on lower incomes to construct their own homes. All by reducing or getting rid of the requirement to find the up-front capital to purchase land.

Are there any drawbacks?

While you might find it beneficial to prevent the high expense of purchase initially, paying yearly ground rent charges can also hurt in the long run. These charges are accountable to increase in line with the regional market rate for land, and you may have little control over the increase.

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

What's more, there is a risk your extension demand might be denied. The landowner might not wish to extend the lease, possibly preferring to establish the land or utilize it personally in some method. If you've invested money to make the land suitable for purpose this could be difficult.

As a leaseholder instead of a freeholder you will not have total control of what you can do with or on the land. Make certain to examine what you are and aren't allowed to do according to the terms of your lease.

Feel confident, many of these threats can be reduced by doing your research and seeking expert legal advice upfront.

What takes place at the end of a lease?

At the end of a lease, where no extension has been agreed, the landowner will have the right to seize the land and whatever that has been built on it. Ownership is lawfully transferred. Use Addland's guide on how to discover who owns land to find the best method for you to research land ownership.

Interestingly in numerous 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 doesn't exist in the very same method. If the lease is not to be extended, the council will generally accept pay the outgoing leaseholder the residential or commercial property appraisal of any structure that has been built on the land.

Is leasehold the best model for you? Addland can help you discover leasehold land for sale In the UK, conserving you time by offering you all the information you need in one place. And with information from HM Land Registry and Ordnance Survey, covering factors to consider from flood zones to AONBs, we can help you build a complete image of the land you're looking to buy.

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