Owning the leasehold interest in a property means that you own the building, and not the land it is on, and that your ownership is for a fixed number of years.
If you own a leasehold property, you must pay a ground rent to your ground landlord, the person who owns the ground it is built on.
The amount of ground rent paid varies.
Often, the ground landlord is the local authority.
In many situations, the ground rent is neither demanded nor paid.
Owning the freehold interest in a property means that you own the land and buildings (if any) outright.
There is no period of years attached to the ownership, and there is no ground rent to pay.
A ground rent is a regular payment made by a holder of a leasehold property to the freeholder or the superior leaseholder, as required under a lease.
There is still sometimes a misconception among people that freehold is better than leasehold when selling.
But a long lease is a perfectly good title.
However, there are quite a few leases in existence which have less than 70 years to run, so people should check.
When you are buying or selling a property, any ground rent will be recorded on the previous deeds (if the property is registered with the Registry of Deeds) or on the folio (if the property is registered with the Land Registry).
If a person’s lease is running out, it is important to start the acquisition procedure as soon as possible.
These procedures are straightforward.
Buying out the ground rent means that people can more easily sell, mortgage, or develop their property.
People should know, too, that they can approach their landlord/builder at any time and buy out the ground rent by agreement.
The Property Registration Authority’s (PRA) Ground Rents Purchase Scheme allows leasehold owners to buy out their ground rent and become outright owners of their property.
The amount to be paid when buying out the ground rent can either be agreed between you and the ground landlord (consent procedure) or else obtained through an arbitration procedure.
The amount of ground rent is set by the arbitration procedure, if you are buying it out under the Ground Rents Purchase Scheme, and cannot agree the amount with the ground landlord.
If you buy out your ground rent, whether from a private landlord or a local authority, the PRA will issue a Vesting Certificate.
The Vesting Certificate is a new title deed to your property. It is a very important document. You are strongly advised to have it registered with the Land Registry or the Registry of Deeds, as appropriate, to record the fact that you acquired the freehold to your property.
If you are paying ground rent, and qualify to buy out the ground rent and acquire the freehold interest, then you would be well advised to do so.
However, if you find yourself in this situation, it is prudent to engage the services of a professional valuer and your solicitor.
Karen Walsh, from a farming background, is a solicitor practicing in Walsh & Partners
17, South Mall, Cork (021-4270200), and author of ‘Farming and the Law’.
Walsh & Partners also specialises in personal injury claims, conveyancing, probate and family law.