Chapter 15Business propertyThe word ‘estate’ is used because in theory at least the
Queen owns all our land and we can only hold an estate,
as it is called, from her; in other words, part of what
she owns. However, the Queen has now no right to take
back these estates from their owners.
The freehold
If we have an estate from the Queen, we want to know
how long it will last. The fee simple absolute in posses-
sion (or freehold) lasts indefinitely and the word ‘fee’
means that the land can be inherited, as where it is left
by the owner to another person by a will. ‘Simple’ means
that it can be passed on to anyone. The word ‘absolute’
means that it must not be what is called a modified fee,
such as a life interest, which can only be an equitable
interest behind a trust (see below).
There must also be possession of the land, though the
freehold owner need not be living on the property; it is
enough if he receives rent for it, as where he has let it on
a lease to a tenant and is himself a landlord.
So, if freehold land is sold or left by will to X, the free-
hold will belong to X and he can pass it on to another.
If, however, land is left ‘to X for life and after his death
to Y’, X does not take a legal estate of freehold, nor does
Y. Y’s interest is absolute but not yet in possession until
X dies. X’s interest is in possession but is not absolute
because it is only for his life.
The above interests are equitable interests and can
only be held on a trust. The trustees would have the free-
hold and when X died they would transfer the freehold
to Y who would then be the absolute owner and the trust
would come to an end.
The leasehold
A term of years absolute, usually called a lease, is an
estate which lasts for a fixed time. It is usually given by a
freehold owner to a tenant. It will normally be for a fixed
period, e.g. 21 years.
A lease for a fixed term comes to an end when the
term finishes, though in the case of business leases there
may be statutory protection, in terms, e.g. of security of
tenure under the Landlord and Tenant Act 1954, Part II,
which was considered earlier in this chapter.
The commonhold
The Commonhold and Leasehold Reform Act 2002
(CLRA 2002) sets up the commonhold.
Generally
A commonhold is defined as a freehold with special
characteristics – mainly that it is not necessary for the
property to have foundations in the land, which is a
requirement for the ordinary freehold. This is why it is
often referred to colloquially as a ‘flying freehold’.
The owners of commonhold units such as common-
hold flats will be members automatically of the com-
monhold association that will own the common parts
such as lifts, entrance halls, stairs, refuse areas, gardens
and driveways. The association will be a company lim-
ited by guarantee governed by the Companies Act 1985.
The use and maintenance of the units will be governed
by the commonhold community statement(CCS): the
CCS is the constitution of the commonhold land and
must be registered at HM Land Registry, and a com-
monhold assessment will fix the percentage payable for
each unit. This in other situations, e.g. leasehold flats,
would be a service charge.
Most commonholds will be a block of flats but they
could be shop units in an arcade or units on a business
park. Therefore, property capable of becoming a com-
monhold unit is residential or commercial property. A
unit-holder will have a registered freehold title to it.
The usual provisions for company winding-up will
apply where a commonhold association becomes in-
solvent and it will be necessary to dissolve an associ-
ation where the unit-holders wish to sell the block for
redevelopment.
Three major points about commonhold from a com-
mercial aspect are:(a) Although it will be possible to convert from lease-
hold to commonhold, it will be necessary to obtain
the consent of all the existing leaseholders, which
indicates that the legislation is aimed mainly at new
developments.
(b) In the case of a residential commonhold, there will
be a restriction on the commonholder letting the
premises. A maximum of only seven years will be
permitted. This provision will be most unattractive
to the property industry because it means in effect
that investors will not want to invest in common-
hold property. The object of the restriction is to
develop a community and not encourage the absen-
tee landlord syndrome which has often blighted
leasehold developments. Business leases, e.g. shops
within the development, will be subject to the terms
of the commonhold statement that is filed at the427