What is leasehold?
The basis of leasehold law is that when you buy a leasehold property you do not own it outright as you would would with a freehold property. In fact you only purchase the right to live at the property for a certain number of years (usually 99 years or more). From a legal point of view the "owner" is a really a tenant, in much the same way as he or she would be if they were renting a property. i.e. taking out a monthly tenancy. The law relating to these situations is very different but there are some similarities, e.g. you can be evicted if you do not behave yourself.
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The reason for a lease is to ensure that all residents in a block of flats obey rules such as not making too much noise, not destroying or damaging the property or restricting access, etc. This would not be possible if flats were sold freehold.
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When flats are created leases need to be prepared to set out the rights and obligations for each flat owner. It is important that the relationship between occupiers are set out clearly. A lease must clearly describe the flats and it must be for a fixed period of time. A ground rent is usually payable to the freeholder who will maintain the building and the common parts, if any. More details are here.
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There are many variations in the format of leases because of the nature of the building, the number of flats and the nature of the services provided.
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It is important for you to appreciate the restrictions that it imposes on your use of the property. Whilst a lease is difficult to understand you must be aware of certain items in the sections headed covenants, restrictions or regulations.
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Leasehold law is heavily weighted in favour of the freeholder and disputes with a difficult freeholder can detract from your enjoyment of the property and make it difficult to sell the property. The freeholder has the power to re-enter and repossess the property if any terms of the lease are not adhered to, but they would need a court order to do this). It could leave you without any compensation, nowhere to live and possibly a mortgage to pay off. If you receive threats from the freeholder or managing agents for arrears or any breach of the lease then you must take action without delay. If in doubt take legal advice immediately. You should always pay service charges when demanded but state that you are paying under protest if appropriate.
Unfortunately the lessor will not always behave reasonably; although the lease will specify what should be done there is always scope for interpretation and some lessors will exploit this, and in some cases ignore the lease completely. If you need to take legal action against the lessor it can be expensive, time consuming, and very stressful.
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If you are buying a property you must be sure that there are no outstanding disputes. Your conveyancer will ask both the seller and the freeholder or managing agent to confirm that there aren't any.
The lease will show the original lessor and lessee. This document does not change even when the property is sold and the freehold could also have been transferred since the lease was granted. The terms of the lease are rigid and cannot be altered unless agreed by both sides. It can be complicated and expensive to obtain any variations to the lease if they are required, and usually only if both the leaseholder and the lessor agrees to them.
In extreme circumstances it is possible to vary a lease without the lessors consent by obtaining a court order, but usually as a last resort, and again it is likely to be expensive.
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The terms freeholder and lessor are usually one and the same thing, but it gets a bit complicated if there is head lease and sub-lease, where, for example, there are several buildings on an estate there will be a head lease for the entire estate and sub-leases for each building.
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A flat "owner" is described as leaseholder, lessee or tenant.
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