How a Leasehold Works

A leasehold is an agreement between the original and real owner of the house/property and the buyer of the house who wishes to buy the house for stay or otherwise for a particular time duration through a set of terms and conditions which form the basis for the lease.

• Owner

Owner is termed as freeholder of the property and carries the complete authority over the property, including the land and any changes or amendments to be made in the property, its layout, structure and built. hence any of these components entitle him to charge a price from the buyer, either temporary or permanent. Most of the houses do happen to be freehold and both the house and land is fully owned by the freeholder. But in cases of few real estate developers, the property is sold on lease and this creates an opportunity for long term cash flow on terms of the developer. This is the scenario which recently resulted in the ground rent scandal.

• Buyer

The person who buys the property is called the leaseholder because the agreement comes in the form of a lease valid for a particular time duration. Leaseholder is liable to pay freeholder whenever there is a change made to the house, along with the ground rent for keeping the land and definitely the initial fee as a price for the house or the property. Most of the time, due to the asymmetric nature of the lease agreement, leaseholder is the one who was left most vulnerable in ground rent scandal if no measures are taken for cover and expert advice.

• Agreement

This is the lease document which contains all the terms of the lease and transaction between freeholder and leaseholder. This contains the duration of the lease, the payments made and to be made in future to the freeholder through leaseholder, the conditions in which lease can be terminated and when charges can e applied and imposed on the lease holder in special circumstances.