Freehold Estate
A freehold estate in the UK refers to complete and indefinite ownership of land and any buildings on it. It is the most complete form of property ownership in UK law.
Key Features –
- Permanence: Ownership is not limited by time — you own the land and buildings forever (unless you sell or transfer them).
- Full Control: You have the right to use, modify, or dispose of the property (subject to planning laws and local regulations).
- No Ground Rent: Unlike leasehold, there’s usually no ongoing rent or obligation to a landlord.
- Includes Fixtures: Permanent structures and fixtures (like walls, roofs, or built-in solar panels) are part of the estate.
In Legal Terms:
A freehold estate is often called an “estate in fee simple absolute in possession” — meaning:
- Fee simple = can be inherited or sold
- Absolute = without limitations
- In possession = the owner has immediate rights to occupy/use the property
Leasehold Estate
A leasehold estate means you have the right to use a property for a fixed period, but you do not own the land it stands on. Instead, you lease it from the freeholder (landowner).
Key Features –
- Fixed Term: Leaseholds are usually granted for 99 to 999 years, but can be shorter.
- Ownership Limitations: You own the building or flat, but not the land it’s built on.
- Ground Rent & Service Charges: You typically pay Ground rent to the freeholder Service charges for maintenance of shared areas (especially in flats)
- Lease Conditions: You must follow the terms of the lease, which may restrict things like alterations or subletting.
- If the lease is granted for more than 7 years, it must be registered with HM Land Registry
Sub-lease
A sub-lease is a legal arrangement where a tenant (the leaseholder) rents out all or part of the property to another person, called the sub-tenant, for a period shorter than their own lease.
Key Features:
- The sub-lessor (original tenant) doesn’t own the property—they only hold a lease.
- Shorter Term: The sub-lease must end before the main lease expires.
- Landlord’s Consent: Most leases require permission from the freeholder or superior landlord before sub-letting.
Two Legal Relationships:
- Landlord ↔ Tenant (main lease)
- Tenant ↔ Sub-tenant (sub-lease)
Example:
Alice rents a flat on a 25-year lease. She sub-lets the flat to Bob for 5 years. Bob is a sub-tenant, and Alice is both a tenant (to the freeholder) and landlord (to Bob). In the example where Bob (the sub-tenant) doesn’t pay the rent, Alice (the head tenant) still needs to pay her rent to the freeholder (landlord).
Alice has a legal contract (the head lease) with the freeholder. Bob has a separate contract (the sub-lease) with Alice. If Bob fails to pay rent under the sub-lease, that does not affect Alice’s obligation under the head lease.
Ending of lease agreement under UK law
Here are the main reasons why a lease agreement may come to an end under UK law –
- Expiry of Fixed Term – The lease naturally ends when the agreed period expires (e.g. a 99-year lease reaches year 99)
- Surrender (Mutual Agreement) – Both the landlord and tenant agree to end the lease early. This can be done formally (by deed) or informally (e.g. giving up possession and the landlord accepts it).
- Forfeiture – The landlord ends the lease due to a breach of lease terms by the tenant (e.g. non-payment of rent, illegal use).
- Break Clause – The lease includes a break clause, allowing one or both parties to end the lease early.
- Merger – The lease ends because the tenant acquires the freehold or the freeholder acquires the lease, merging the interests.
