Understanding Freehold and Leasehold

There are three ways you can own your property: freehold, leasehold or with a share of the freehold.  A freeholder owns the property outright, plus the land it has been built on.  There’s no lease to run out, no dealing with a landlord and no need to pay ground rent, service charges or any other fees. If you are a leaseholder on a development you can serve a Section 13 Notice on the freeholder and buy a share of the freehold - as long as at least 50% of your fellow leaseholders agree to participate. Buying a share of the freehold effectively extends your ownership up to 999 years. That’s usually long enough for most people!

As leaseholders with a share of the freehold, it means you take on certain financial and property maintenance responsibilities so you’ll collectively need to set up a resident management company (RMC) . FirstPort assist over 200 RMCs in the UK so are well placed to help you. As a leaseholder, you own the property and the land it is built on for the specified length of the lease agreed with the freeholder – often a lease is for 99 years. When the lease ends, ownership reverts to the freeholder although you may be able to extend that lease through negotiation.

When you buy property leasehold, it’s worth checking how long the lease has still to run and what the service charges , management fees , ground rents , and related costs may be. The leaseholder may also pay ground rent to the freeholder (landlord).  As a managing agent, FirstPort can collect this on behalf of the freeholder or the freeholder can invoice the leaseholder directly.

What is the difference between a Landlord and a Managing Agent?
In simple terms, Landlords own property while a Managing Agent or Property Manager is instructed by a property owner to supervise and manage properties.

Your Landlord (sometimes known as a Freeholder) is first and foremost a party to your lease. They are the person who owns the land that your property sits on.  This could be an individual or a company. You have a right to know who owns the freehold of your property at any given time.

The Landlord has an obligation to maintain the communal areas at your development. In most circumstances (where allowed by the lease) they instruct a managing agent to do this on their behalf.

Your Managing Agent is not a legal party to your lease (except in exceptional circumstances), but is instructed through a formal arrangement known as a Management Agreement.

Why is Peverel (FirstPort) named in my Lease?
A normal lease only has two parties, a Landlord (or Freeholder) and Lessee (or owner). In these circumstances the Managing Agent is appointed by the Landlord who has the responsibility for maintenance. Under some historical arrangements, a number of developers put in place what is known as a ‘tri-party’ lease which included the name of the Manager. FirstPort owned companies appear in some of these leases.

The reason for the tri-party lease was broadly to make sure there was a direct relationship between the lessees and the Manager. It was also a way of introducing stability and continuity of the Manager from the ‘build phase’ onwards so that more effective maintenance could be achieved.

We do recognise that this gives us a privileged position and security of tenure in our management . We don’t take this for granted and we work with lessees and landlords to ensure we meet all our obligations under this type of agreement.

Is FirstPort a Landlord?
Owning properties is not part of our core business, which is about managing properties and looking after our residents. We do not buy freeholds although FirstPort does own a small number of properties and leases from historical arrangements. Our focus now is on providing expert property management services to landlords and customers across both the general residential market and the specialist retirement housing market.

Again, as part of a historical arrangement, FirstPort does currently have an interest in around 350 House Manager flats across the country.

What is a Management Agreement? Why can’t I see it?
The Management Agreement is a formal arrangement between FirstPort as Managing Agent and your Landlord/Freeholder. It sets out all the responsibilities that we carry out on behalf of the Landlord, the services we provide to Leaseholders and the management fees that are payable as well as any additional fees for one-off services such as subletting consent.

We need the permission of the Landlord to share these. Sometimes the Management Agreement is included in a broader commercial document which contains commercially sensitive information, preventing it being shared. In these circumstances we always endeavour to share appropriate parts of the agreement.

LEASE (The Leasehold Advisory Service)
We recommend The Leasehold Advisory Service if you are looking for FREE consumer advice on the law affecting residential leasehold and commonhold property in England and Wales. It is totally independent and is funded by the Government.