English law has developed over many centuries and has amassed various forms of property ownership which are incredibly complex and, as such, hard to compare with those in Poland. From full ownership of land and anything permanently affixed to the land such as buildings (collectively referred to as real estate or immovable property) through the distinction between the title to land and title to property as well as numerous types of shared ownership (with the state, bank or other natural or legal person) to Right of Survivorship, which dates back to the Middle Ages, it is simply impossible to properly capture their richness and variety. Moreover, due to the nonexistence of similar terminology and concepts in the Polish law tradition it is also extremely difficult to translate them. In order to most precisely explain the differences between these various forms of property ownership it is necessary to begin with an overview.
The following types of property ownership are common in England and Wales:
Freehold – is the ownership of real estate and land to which such real estate is attached. The owner owns 100% of both the land as well as the real estate erected upon it.
Leasehold – purports the ownership of the real estate only (and the ability to sell it), whilst the land belongs to another person. It applies almost always to flats; although there are a significant number of houses in England under leasehold. Usually the land owner will charge rent for its lease (ground rent). This form of property ownership is close to its Polish equivalent called użytkowanie wieczyste gruntu (perpetual usufruct of land).
The length of the lease is typically between 99 and 999 years. It is very important that in the case of buying property, the lease thereto will remain valid for at least 60 years; otherwise there might be significant difficulties in applying for a mortgage.
Flying freehold (share of freehold) – is a form of freehold. This type of ownership is found mostly when a freehold property is transformed into two properties, e.g. flats. The land attached to such property belongs then to both property owners in their respective proportions. There is no rent to pay, but the ownership of one owner is limited by the rights of the other. Some encumbrancers will not agree to a mortgage where the loan is secured on this type of property.
Commonhold – is a relatively new form of property ownership which requires cooperation between freehold property owners living in a defined location. It involves the freehold tenure of part of a multi-occupancy building with shared ownership of and responsibility for common areas and services. The common areas are usually owned by a company composed exclusively of freehold property owners in the said location.
There are also several schemes designed to help in buying a property, especially for first-time buyers.
‘Shared ownership scheme’ – enables the purchase of a house or flat together with the local authorities or housing association. The buyer then becomes an owner of shared equity in such a property the remaining shares of which are owned by the housing association or the local authorities. In this case there is still rent to pay in relation to the latter. There is also the possibility of buying out the remaining shares, e.g. when the financial situation of the buyer improves.
‘The right to buy’ – is a policy which gives secure tenants of councils and housing associations the legal right to buy, at a large discount, the flat they are living in. In order to qualify for this scheme, the tenant must have lived in the property for at least two years (or five years, if the tenancy started after 18 January 2005).
‘Home Buy Direct’ / ‘Help to Buy’ – is a so-called ‘shared equity scheme’ for those who are buying a property for the first time, where a mortgage is for a minimum of 70% of the property value and the remaining 30% is financed in the form of an ‘equity loan’. For the first five years there are no repayments for the latter, usually provided in equal parts by the government and a developer. This scheme is usually only available for purchases on the primary market (new-build properties).
Author: Marta Grzelak, Partner at McHale & Co Solicitors* (see website).
*McHale & Co Solicitors do not provide legal advice in regards to properties in Scotland