In the latest of our “jargon busting” series, we explain some of the terms frequently used to describe what is involved in buying, selling and renting leasehold property.
The industry has a propensity to shroud property transactions in mystical terms such as “title, tenure, searches” and the like. But when it comes to leasehold property, we tend to take the jargon to a whole new level. To bust the jargon, we explain the meaning of frequently encountered leasehold terms.
Administrative costs – An amount charged by a landlord for costs other than those relating directly to the provision of services used in common or the maintenance of a building. Administration charges typically relate to the provision of consents for various matters, the provision of information or a landlord’s legal costs or charges associated with a breach of lease.
Assignment – The sale or transfer of a lease.
Block – A building in which a leasehold property might be situated.
Breach of lease - A failure by either party to comply with the terms of the lease.
Buy-to-let – Where a leasehold property is purchased with the intent of subletting the property.
Collective enfranchisement - The legal right that a group of participating leaseholders (50% or more) have to buy the freehold of the building from their Landlord.
Common areas – The parts of a building that are available for use by all tenants for example, stairs, lifts, corridors, garden areas, car parks.
Consent – Agreement of the landlord that might be required under the lease for subletting, make alterations to the property, keeping a pet etc.
Counter-notice - The Landlord’s response to the initial Notice of Claim served by the Leaseholder in a lease extension, or the participating Leaseholders in a collective enfranchisement.
Covenant - A promise made by a party to the lease to perform an action [positive covenant] or refrain from performing an action [restrictive covenant].
Demised premises - The property to which the leaseholder has the right of usage as defined by the lease.
First Tier Tribunal - The First Tier Tribunal is a more informal court used to settle disputes between landlords and leaseholders on a range of matters, such as service charge disputes.
Fixtures – Items within the demised area of a leasehold property that would not be removed on the assignment of a lease – for example doors, cupboards, electrical fittings, wall heaters.
Forfeiture - The landlord’s ultimate sanction for breach of a tenant’s covenant i.e. the right to re-enter and repossess the property and bring the lease to end.
Freeholder – The name given to the owner of the land on which the block of flats is built. May also be known as landlord or lessor.
Ground Rent - An annual amount paid by the Leaseholder to the Landlord for the use of the land on which the Leaseholder has a flat.
Improvements – Any work carried out to improve a property but not work that is required to remedy disrepair.
Leasehold interest - The leaseholder's rights in the property.
Leasehold Property – A property under which the rights of occupancy are granted to a lessee under the terms of a lease.
Lease - The contract that sets out the terms governing the relationship between the landlord and leaseholder. The document will contain covenants, rights and restrictions for both parties to the lease which are essentially the rules and regulations relating to the property.
Leaseholder – A person having the right to use a property under a long lease. May also be referred to as lessee or tenant.
Lease extension – The process of extending the term of lease either through negotiation between the parties or by the leaseholder exercising their statutory rights to extend the lease.
Lessee - A person having the right to use a property under a long lease. May also be referred to as leaseholder or tenant.
Lessor – A party to the lease and may also be known as the landlord or freeholder
Long Lease - A lease granted for a term of more than 21 years.
Managing agent – An agent appointed by the freeholder/landlord to manage the common areas of a block, collect ground rents and service charges etc.
Notice of Claim (Initial Notice) - The notice served by the Leaseholder on the Landlord under Section 13 of the 1993 Act, the service of which formally commences the enfranchisement process.
Peppercorn Rent – A nominal amount of rent payable under certain leases. Where a statutory lease extension is exercised by the leaseholder, the ground rent is reduced to a peppercorn or zero value.
Residents association – A group formed of residents of a block who represent the interests of everyone living in the building. By law, landlords must ‘recognise’ and consult with residents associations.
Right To Manage (RTM) - The right of Leaseholders within a block to take control of the management of the building. A Right to Manage company in which each participating Leaseholder is a member must be formed.
Section 20 Consultation - 'Section 20 of the Landlord and Tenant Act 1985 (as amended)', and the 'Commonhold and Leaseholder Reform Act 2002' requires that the landlord must consult with the leaseholder before carrying out repairs above a certain value.
Service Charge - The amount payable by each leaseholder/tenant towards the maintenance and repair of the common parts of a block of flats.
Service charge statement – Typically an end of year statement which shows the actual amount a landlord spent on managing a building during the year.
Subletting - Letting of the property by the leaseholder to a third party. Sometimes also referred to as underletting.
Tenant – An individual granted the right to use the property under the terms of the lease. May otherwise be know as the lessee or the leaseholder.
Variation of lease – The changing of one or more of the terms of the lease either through agreement between the parties or by one of the parties through an application to the First Tier Tribunal under Part IV of the Landlord and Tenant Act 1987.
Want to know more?
Read our further blogs to get a better understanding of the differences between leasehold and freehold and what's involved in buying leasehold property. Also, stay up to date with the latest news in leasehold reform.