Owning freehold property is the closest anyone can get to owning property outright in English common law. The freeholder of a block of flats can be an individual, a finance company, a ground rent investment company, a company which owns commercial and residential property (mixed use) or a local authority.
Some leasehold properties actually have more than one freeholder because whilst a freeholder holds what is known as a superior lease, they can choose to sell what is called an ‘intermediate’ lease to someone else, who is known a head-lessee. This then results in 3 different levels of ownership in the building:
- The freeholder who has the highest level of overall ownership;
- The head leaseholder (also called the head lessee) who is directly responsible to the leaseholder;
- The leaseholder.
The freeholder will usually covenant (promise) to provide:
- Quiet enjoyment (this is implied which means it is not expressly written into the lease but implied by common law);
- The upkeep of the structure including the roof and the guttering;
- Maintenance of the communal areas, such as lifts and communal stairways as well as the general management of the building;
- Services – heating, lighting in common areas, cleaning, grounds maintenance etc: caretaker, scheme manager or porter services.
- An accounts service.
For carrying out their covenants, freeholders use the mechanism of the lease by which to recover their outlay but what is not widely recognised is that the long lease is also created with the specific aim to make money for freeholders. So commissions can be earned through the placing of buildings insurance, and leases will need to be extended at some point. It is the area of ground rent which is earning the most attention from the press and Government and the reasons why can be read here.