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Estate agents in the UK offer leasehold land and freehold land. Do you understand what the distinction is? If you're looking to purchase a piece of land it's vital you understand on what basis you're purchasing, as it can affect your rights in all sorts of ways.

In this guide, we'll be focussing on leasehold land. We'll explore what it is and whether it might be the right choice for you.

What do we suggest by the term leasehold land?

When it comes to leasehold land much like property leases, the purchaser does not end up being the outright owner. Instead, the buyer purchases exclusive approval to utilize the land for a period of time. A piece of land's ownership history, in addition to its present tenure (i.e. freehold ownership vs leasehold ownership), are all included in its title deeds, a copy of which is usually held by HM Land Registry.

Leasehold ownership lengths can differ extremely. Some lease lengths may be for a 50-year duration, a 90-year duration and even a 999-year period, depending on the initial lease and when it was drawn up. When the time limit on the lease comes to an end, it can typically be extended, but this might incur legal costs.

There are pros and cons to the purchase of leasehold land. In particular situations, such as the development of affordable housing in central cities with high residential or commercial property rates, it can be of excellent advantage.

Where did the concept of leasehold land originated from?

The idea of owning land and leasing it to others is not a brand-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 model as we understand it dates back to when the 'landed gentry' owned big swathes of land or vast nation estates, offering long-lasting lease arrangements to those wanting to farm or live on the land. In the UK some of the greatest landowners were (and still are) The Crown and the Church, with many long leases offered to allow the structure of both commercial residential or commercial properties and domestic properties.

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

It's only been considering that the Second World War, when local authorities were seeking to help restore their cities and neighborhoods and develop economical housing in a hard financial period, that this leasehold land model began to make sense.

It enables much-needed budget friendly housing advancements to be financed and developed without the crippling up-front costs connected with land purchase. And what's more, it sees a consistent stream of earnings coming back into the public coffers over the longer term.

Is renting land a good idea?

As the freeholder, the owner of the land will require to pay the costs of purchasing the land. This might be a large sum. If you don't have readily available capital to invest, renting can be a great path to acquiring the right to use the land for whatever you want at a fraction of the initial expense.

Leasehold land uses more security than you might believe. For the most part, a leasehold agreement uses the same level of security as a freehold. The agreement you sign to purchase the lease will state the specific duration of time for which the land is leased to you. During this duration, nobody can remove 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 be able to remodel, extend or alter it, offer it or lease it out without first looking for approval from the landowner. What's more, if you die, the ground lease can be passed on by means of your will.

You will be able to use your parcel of land nevertheless you desire, depending on the terms of the lease and topic to regional preparation authorization. Most contracts will permit you to put up a house, commercial residential or commercial properties, construct something for the good of the neighborhood, or work from the land as you require to.

Once the lease period is over, you should have the right to renew your arrangement, by means of a lease extension, and continue with the plan you had. And it will continue to be the responsibility of the owner to keep the land that he has rented, covering upkeep costs, service charges, administration charges etc.

And satisfying the purchase price ought to not be a concern, there are numerous mortgage lenders that will be pleased to help you fund the purchase as long as the lease term staying is adequate.

Who does leasehold suit?

Leasing land works specifically well in some circumstances. If, for example, a landowner wishes to keep ownership of a package of land but not develop it themselves, they might get in into a land lease contract with a developer. This would put the onus on the designer to construct and sell several homes, while the freeholder retains ownership of the land.

In this case, the residential or commercial property owner would enjoy a consistent earnings stream from ground lease charges and other maintenance costs.

Due to the expenditure and length of time it takes before a return on financial investment is seen, it can be particularly difficult for smaller sized personal developers to obtain excellent plots of land to develop on, particularly in more areas such as central cities.

If developers who aren't cash-rich find it hard to protect financing to money the up-front purchase of a piece of land, the chance to lease and pay back throughout time, lastly passing those continuous costs to buyers, is an appealing one.

The leasehold design provides the chance for councils, charities, housing cooperatives and Community Land Trusts (CLTs) - a form of community ownership - to come together and assist people on lower incomes to construct their own homes. All by reducing or removing the requirement to find the up-front capital to acquire land.

Exist any downsides?

While you might find it advantageous to avoid the high cost of purchase initially, paying annual ground rent charges can also be unpleasant in the long run. These charges are liable to increase 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 first place it is essential to check how long is staying on the lease. Extensions not just require sensible effort and time, however they are most likely to sustain legal fees.

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

As a leaseholder rather than a freeholder you will not have total control of what you can do with or on the land. Be sure to examine what you are and aren't permitted to do according to the regards to your lease.

Rest guaranteed, many of these dangers can be reduced by doing your research and looking for 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 can acquire the land and whatever that has been constructed on it. Ownership is lawfully transferred. Use Addland's guide on how to discover who owns land to find the best way for you to research study land ownership.

Interestingly in numerous places in Europe - where leasehold is a popular technique for councils to own and lease out land and residential or commercial property - this right of foreclosure does not exist in the same way. If the lease is not to be extended, the council will typically agree to pay the outgoing leaseholder the residential or commercial property evaluation of any structure that has been built on the land.

Is leasehold the right model for you? Addland can assist you find leasehold land for sale In the UK, saving you time by providing you all the information you require in one location. And with data from HM Land Registry and Ordnance Survey, covering considerations from flood zones to AONBs, we can help you build a complete photo of the land you're looking to purchase.

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