leasehold interest
📖 What is leasehold interest? Meaning and definition
A leasehold interest is a form of property ownership where an individual, known as the leaseholder, holds the right to occupy and use a property for a fixed term, which can range from a few years to several hundred. This differs from freehold, where the owner possesses both the property and the land indefinitely. The leaseholder typically pays ground rent to the freeholder, and their rights and responsibilities are detailed in a lease agreement.
This type of interest is often encountered in cases of compulsory acquisition, where a public body takes ownership of a property for public use. In such situations, the leasehold interest is valued to determine the compensation payable to the leaseholder. The valuation date is a crucial element, as it fixes the point in time at which the property's open market value is assessed.
Compensation for a compulsory acquisition of a leasehold interest can include not only the open market value of the property but also additional payments such as a home loss payment, calculated as a percentage of the market value, and disturbance costs. Disturbance costs cover expenses incurred by the leaseholder due to the acquisition, such as the value of items left in the property or future costs of acquiring a new one. The process involves determining the fair value of the leasehold interest and any associated losses.
📋 Requirements
- A valid lease agreement must exist for the property.
- The property must be subject to a fixed term of occupation.
- The leasehold interest may be subject to compulsory acquisition by a public body.
📝 Procedure
- A general vesting declaration or notice to treat is issued by the acquiring authority.
- A valuation date is agreed upon for assessing the property's open market value.
- The open market value of the leasehold interest is determined, often with differing opinions from the claimant and the acquiring authority.
- Compensation for disturbance and other losses, such as home loss payments, is calculated.
- The Upper Tribunal (Lands Chamber) may be involved in determining the final compensation amount if there is a dispute.
💡 Examples
- A person's leasehold interest in a ground and first floor maisonette was compulsorily acquired by a local council, leading to a dispute over its open market value and disturbance compensation.
- A long leasehold interest in a former retail unit, converted to a place of worship, was subject to compulsory purchase, requiring the Tribunal to determine compensation under specific legislation.
- Claimants who were self-represented sought compensation for the compulsory acquisition of their leasehold interest in a residential property, including basic loss payments and disturbance costs.
- A leaseholder of a residential flat had their property acquired by a local authority, and the compensation included the property's value and a home loss payment.
📚 Legal basis
- Places of Worship (Enfranchisement) Act 1920
- Land Compensation Act 1973
❓ Frequently asked questions
What is the difference between leasehold and freehold?
Leasehold means you own the right to occupy a property for a set period, but not the land it sits on. Freehold means you own both the property and the land indefinitely.
What happens if my leasehold property is compulsorily acquired?
If your leasehold property is compulsorily acquired, you are entitled to compensation. This typically includes the open market value of your leasehold interest, a home loss payment, and disturbance costs for any losses incurred due to the acquisition.
How is the value of a leasehold interest determined during compulsory acquisition?
The value is usually determined based on the open market value of the property at an agreed valuation date. Both the leaseholder and the acquiring authority may present their own valuations, and if there's a dispute, a tribunal might decide the final amount.
What are 'disturbance costs' in the context of leasehold acquisition?
Disturbance costs are part of the compensation for compulsory acquisition. They cover expenses you incur because of having to move, such as the value of items left behind in the property or the costs of acquiring a new property.
Can I challenge the compensation offered for my leasehold interest?
Yes, if you disagree with the compensation offered, you can challenge it. Disputes are often referred to the Upper Tribunal (Lands Chamber) for a decision, as seen in various cases where claimants and councils had different valuations.