Tenure

The word "tenure" refers to the way in which a property is owned.

Freehold

This is the simplest and most straightforward form of tenure. It means that you have outright and complete ownership of a house and the land it stands on.

Freehold ownership is usually for houses. Although it is possible to have a freehold flat, by their nature flats sit one on top of the other on the same piece of land — so only one of them can be freehold. For this reason, most flats are either leasehold (see below) or the new commonhold (see below).

Being the freehold owner of a house does not, however, mean that you can do absolutely anything you wish with it. When the house was first built, the builder or original owner of the land may have stipulated certain restrictions to apply to the house for all time — these are restrictive covenants. They might, for instance, stipulate that boundary fences or walls must be maintained, or that the outward appearance of the property should not be radically altered, and they very frequently state that it can only be used as a single dwellinghouse — thus preventing conversion into flats or creating a shop in your front room.

A unique difficulty arises when restrictive covenants have been lost. Their existence may be mentioned in the deeds but there may be no copy of the wording. Thus you know there are things you cannot do, but don't know what! You can't simply ignore their existence because you cannot guarantee that someone with a right to complain might not one day find a copy of the restrictive covenants and object to the way you are using the property. It is possible to insure against such consequences, so you might find that the cost of the insurance policy is worth the peace of mind it brings.

Leasehold

In a sense this could be said to be not ownership at all because what it gives is only the exclusive use of the flat for a specified time and no ownership of the land. At the end of the term of the lease, the flat will have to be handed back to the owner of the land (the freeholder).

However, in practice, if the lease is long enough, leasehold tenure is to all intents and purposes ownership. If you have a lease of 999 years, at the end of that time neither you nor, indeed, the building will still be in existence so it hardly matters to anyone what happens when the lease expires.

But an important distinction does need to be made between a "long" lease and a "short" lease. A short lease, of say 10 years, is not much different from a rental agreement.

A long lease — defined as more than 21 years — confers many more benefits than simply the length of time. Most flats with a long lease can be sold or sub-let, although this may be subject to conditions. If you have a long lease you are entitled to the automatic (although not free) grant of a 90-year extension to the lease. Furthermore, the owners of all the flats in a block are together entitled to jointly buy the freehold — even if the owner of the land does not want to sell.

A "long lease" in this context refers to how long it was when it was first created.

However, the length of time left to run on a lease is not irrelevant — especially if you are planning to buy a flat — because it has a direct bearing on the sale price. Briefly, the shorter the time left on the lease, the lower will be the value of the flat. Flats begin to lose their value when they have around 70 years left to run. However, this is subject to market conditions and some buyers are now nervous of a term under 80 years.

If you do buy a flat with only a short time left on the lease you will, of course, be the owner and thus entitled to obtain a 90-year extension — but you will have to pay for it. How much you will have to pay may depend on a number of circumstances, so you should find this out before you commit yourself to the purchase.

Commonhold

This is a new method of ownership that came into existence in September 2004.

It is, in fact, a form of freehold for property where there are two or more units that may be owned by different people plus common areas, for instance a block of flats that has shared hallways and stairs. The units (flats) are individually owned but the common parts are owned by a commonhold association (a limited company) whose members must also be unit owners.

Commonhold differs from leasehold in two important respects:

	Ownership of the units does not have a fixed term (as a lease would) — it is in perpetuity
	Anyone who is not an owner of a unit cannot have an interest in the land or common parts — thus there is no landlord

Blocks of residential flats can be commonhold, so can commercial developments, or mixed developments. What matters is that there are units and common areas in the development.

Commonhold is designed to be a better way of owning property than leasehold, but leaseholds are by no means a thing of the past. Although in certain circumstances and with the agreement of all leaseholders, existing leasehold premises could be converted to commonhold, there is nothing that says this has to be done. It is therefore likely that both methods of ownership will continue in existence for many years to come.

Joint Ownership

If you are not the sole owner of a house or flat, then both (or all) owners need to decide between themselves on what terms they will share ownership.

This can be done in two ways:

Joint Tenancy

The property is held in equal shares and on the death of one of two joint owners the other becomes absolutely entitled to the whole of the property. The survivor can sell or otherwise deal with the property as sole owner.

This form of ownership is favoured in many family relationships, e.g. between husband and wife.

Tenancy in Common

In this form of ownership, the shares do not need to be equal. If one owner dies, his or her share can be willed to whoever he or she wishes, or it will pass to the entitled relative if there is no Will — it does not automatically pass to the other joint owner(s). The surviving joint owner(s) may not be able to sell the property without permission, and if the property is sold will not receive the whole of the proceeds of sale.

This form of ownership is favoured where the parties are not married, or where the purchase money has not been supplied in equal shares.

Note that it is possible for one joint owner to convert the ownership from joint tenancy to tenancy in common. However, both owners must consent to a change from tenancy in common to joint tenancy.

Article first published October 2002
Last Reviewed August 2006