Residential flat schemes—freehold, commonhold or leasehold
Residential flat schemes—freehold, commonhold or leasehold

The following Property guidance note provides comprehensive and up to date legal information covering:

  • Residential flat schemes—freehold, commonhold or leasehold

Before 27 September 2004, when the Commonhold and Leasehold Reform Act 2002, Part 1 came into force, leasehold tenure was the only option that a developer could sensibly offer to prospective flat purchasers. The burden of a positive obligation (eg to pay service charge, insurance rent, etc) can only run with a leasehold rather than a freehold estate.

Although this defect could be circumvented on any freehold disposal of a flat by the imposition of an estate rentcharge under the Rentcharges Act 1977 (RcA) 1977), the reality is that many mortgage lenders will not advance money on the security of a freehold flat; they regard a leasehold structure as far better suited to ensuring the continuing provision of services and enforcement of shared obligations. There is also some doubt as to whether the RcA 1977 permits the creation of a reserve fund or allows recovery of contributions for the maintenance of communal landscaped areas which have been retained by the rentcharge owner.

Although in theory every new flat owner could give a fresh series of covenants (binding as a matter of contract rather than as a matter of estate), the scale and cost of the task is unrealistic; each new flat owner would have to enter into a deed of covenant with all the remaining flat owners (and any management company) on