Term of Years Absolute
Whenever a leasehold interest in property is granted it is carried out by creating a lease. The formal expression for a legal lease is "Term of Years Absolute". It can be for any period of time, and many leases are granted as monthly tenancies. This guide, however, is aimed at long leases, most of which would be granted for typical terms of 99 years, 125 years and similar. The lease describes the contractual terms between the person granting it (the lessor) and the person to whom it is granted (the lessee).
Leasehold estates are often created by developers. They will usually purchase the freehold estate of a large parcel of land and then produce an estate plan, dividing the property into smaller units, upon which they erect houses or flats.
A lease is created for each property and an application is made by the developer to the Land Registry who will then grant a separate leasehold title for each of them. In such cases there will be:
- A freehold Title Register and Title Plan (the developer's land)
- A leasehold Title Register and Title Plan (for each house or apartment erected)
- A lease for each house or apartment
Many leasehold properties are created where a person owns a large house and converts it into flats. A lease is created for each flat and separate leasehold titles are granted by the Land Registry.
Relevant Law
The main statutes governing legal estates in property, including leases, for the purposes of this guide, are the Land Registration Act 2002, the Land Registration Rules 2003 and the Land Registration (Amendment) (No 2) Rules 2005.
As a general rule, all registrable leases created after 18 June 2006 must contain Prescribed Clauses, which are defined by the Amendment Rules cited above.
Leases that Must be Registered
Within 2 months of completion of the purchase of a leasehold estate an application must be made for registration at the Land Registry where the lease is for a period of more than 7 years (or where more than 7 years remains on an existing lease). This period used to be 15 years prior to the Land Registration Act 2002. This means that far more leases are now compulsorily registrable than previously, and at some point in the near future this period is likely to be further reduced to 3 years.
There are other types of leases (e.g. discontinuous leases) that are also compulsorily registrable, but these are beyond the scope of this guide.
All of these persons may have a registered interest in the property, which would be as follows:
- Developer - freeholder - lessor
- Builder - leaseholder - lessee
- Owner - sub-leaseholder - sub-lessee
Leases that May be Registered
A lease created prior to 2006 may be voluntarily registered where there has been no disposition (e.g. sale or mortgage) and where there is more than 7 years remaining.
Particulars of Lease and Noting the Lessor's Title
The A section of the Leasehold Title Register contains short particulars of the Lease from which the Register has been created, which include the date it was created, the length of the lease (term), any rent payable and the names of the parties.
Where a lease is registered with its own title, the leasor's title will be noted to this effect.
The lessee is the person to whom the lease has been granted, and the lessor is the person granting the lease. In the case of a new development the lessor is usually the freeholder and developer, although it will sometimes be the case that the freeholder has granted a lease to an independent builder who has in turn created an under-lease to the person to whom the property was sold.
Post-2006 Leases
Subject to certain uncommon exceptions (an exemption must be applied for), leases granted after 18 June 2006 must contain Prescribed Clauses as set out in Schedule 1A of the Land Registration Rules 2003 as amended.
The Prescribed Clauses will appear at the beginning of the lease, immediately after any front cover and list of contents (if there are any).
Pre-2006 Leases
Leases which were registered prior to the requirement for Prescribed Clauses will still contain the same information, but it will be buried within the body of the lease. Prescribed Clauses make it easier to read and manage the lease.
There are 14 Prescribed Clauses, although most modern leases contain other information in the same format for ease of reading.
Schedule 1A lists the Prescribed Clauses.
Obtaining a Copy of the Lease
Where a lease was granted prior to 30 October 2003 the owner's written consent to obtain a copy of it is required. After this date no such consent is necessary. Where consent is necessary, we will send a form of authority to you for you to sign and return.
The Prescribed Clauses
- LR1 Date of Lease
- LR2 Title Numbers - the leasor's title number and any others
- LR3 The Parties of the Lease
- LR4 The Property
- LR5 Certain Statements, e.g. that the lease is in favour of a charity or granted under the Leasehold Reform Act 1967
- LR6 The Term of the Lease (It's length)
- LR7 The Premium paid for the Lease (i.e. purchase price)
- LR8 Prohibitions or Restrictions on disposing of the Lease
- LR9 Rights of Acquisition, e.g. right to renew, right to surrender, landlord's right to acquire the Lease.
- LR10 Restrictive Covenants
- LR11 Easments
- LR12 Rentcharge burdening the property
- LR13 Any application to enter a Restriction in the Title Register
- LR14 Declaration of Trust (where the tenant is not sole proprietor)
Merger of Freehold and Leasehold Estates
Where the owner of a leasehold title acquires the freehold title, as for example, where the leaseholder purchases the ground rent, he may apply to the Land Registry to merge the titles, Provided he is entitled to each title in the same capacity, and provided that any entries in the leasehold title that would prevent a merger are first cancelled, then the application will succeed.
Leasehold Estates that Involve Floor Levels
As from March 2015 the Title Register for all Leasehold registrations that involve floor levels will contain 2 changes:
1 A separate Information Note will be added to the A sesction of the Register after the Property Description. An example of this provided by HM Land Registry in their practice guide is:
"The leasehold land demised by the lease referred to below which lies within the area shown edged red on the plan of the above title filed at Land Registry and being Flat 4, Smith Street, Anytown (DA1 4XX).
NOTE: The flat is on the first floor."
2 A Title Register will no longer refer to additional parcels of land that form part of the Title, such as a garage, parking space, garden or bin store unless the same are subject to a floor level limitation. In such cases there will be an Information Note in the A section of the Register. An example of this provided by HM Land Registry in their practice is:
"The leasehold land demised by the lease referred to below which lies within the area shown edged red on the plan of the above title filed at Land Registry and being 26 Regents House, Richmond Road, Cowgarth and parking space (CK3 8RN).
NOTE 1: The flat is on the first floor,
NOTE 2: The basement parking space is included in the title and excludes the subsoil below."
The Leasehold Title should always be read in conjunction with the Lease, so that the intention and meaning of the contracting parties is understood.