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  1. Please peruse ^^ the title of this question overhead ^^. I don't fathom the reason below for preferring a 999-year leasehold over a freehold, written by Nick Green on 20 June 2022.

There can also be specific advantages for flat owners to continue owning their flats under a leasehold structure. For example, flat owners can club together to buy the freehold on their block (see below) and then grant themselves 999 year leases. The long lease gives them all the same security as freehold, but will also set out the rights and responsibilities of the residents, such as funding the maintenance of the building and placing restrictions on antisocial behavior. This kind of arrangement combines the advantages of freehold with the few perks of leasehold.

  1. If the flat owners are buying the freehold, then why doesn't their freehold ALONE empower them to fulfill their goals of their 999-year lease? To wit, why doesn't their freehold ON ITS OWN "set out the rights and responsibilities of the residents, such as funding the maintenance of the building and placing restrictions on antisocial behavior"? Why do they need a 999-year leasehold to "set out the rights and responsibilities of the residents, such as funding the maintenance of the building and placing restrictions on antisocial behavior"?

  2. Why can't these flat owners, as freeholders, simply covenant these residents' responsibilities?

I quote Ben McFarlane, Nicholas Hopkins, Sarah Nield, Land Law Text, Cases, and Materials (5 edn 2021, Oxford University Press), 892.

2 A covenant is an agreement by deed and, as such, generally only enforceable between the parties—but restrictive covenants can be enforced by and against subsequent owners of the land to which they relate.

3 A restrictive covenant must: (i) relate to land; (ii) be intended to be enforceable against subsequent owners of the land; (iii) be capable of benefiting adjacent land; and (iv) be negative in nature.

I might have stumbled upon the answer to my own question? Op. cit. p 902

23.2.3 NEGATIVITY

The covenant in Tulk v Moxhay had both negative and positive aspects: first, it called for keeping the land in an open state, i.e. it should not be built upon; and secondly, it called for the maintenance and repair of the land, although it was the negative obligation against building that was enforced.24In the later cases of Haywood v Brunswick Permanent Benefit Building Society25 and London and South West Railway v Gomm,26 the court made clear that it would only enforce negative obligations. Negative obligations restrain the owner of the servient land from acting in some way, whilst a positive obligation requires owners to put their hands in their pockets to fund some activity: for example, to maintain the land or repair some building upon it. [Emboldening mine]
      There has been growing pressure to enforce positive land covenants, but the judiciary has firmly passed this particular buck to Parliament. In the following case, the House of Lords refused to overcome more than a century of orthodoxy.

Rhone v Stephens [1994] 2 AC 310 (HL)

Facts: Walford House was divided into two dwellings—a house and a cottage—in such a way that one of the cottage bedrooms lay under the roof of the house. Upon the sale of the cottage, the owner of the house covenanted with the purchaser to keep the roof in repair. Some years later, when the roof had fallen into disrepair, the owner of the cottage unsuccessfully brought action against the then owner of the house: a successor in title to the original covenantor.

24 In Morland v Cook (1868) LR 6 Eq 252 and Cooke v Chilcott (1876) 3 Ch D 694, positive obligations were enforced.
See Bell, ‘Tulk v Moxhay Revisited’ [1981] Conv 55; Griffiths, ‘Tulk v Moxhay Reclarified’ [1983] Conv 29.
25 (1881) 8 QBD 403.             26 (1882) 20 Ch D 562.

This post is getting lengthy, so I shall stop the quotation here.

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    With leasehold, the lessor takes overall responsibility for the property. With freehold, there is not. Which particular freeholder would be responsible for the hallways and stairs? Jul 4 at 9:01
  • @WeatherVane As I read the question, it is why the leasehold is required to create this form of responsibility rather than through a leasehold? Is there some law that means a leasehold can create such requirements that would not be possible under a freehold? That would be the answer.
    – User65535
    Jul 4 at 10:32
  • @User65535 it does not say it is 'required'. The question is about existing leaseholders who decide to all club together and jointly buy the freehold of the entire property. Jul 4 at 11:44
  • Privity of estate is the classic answer. Jul 5 at 4:38
  • @toiv: Rather than adding a possible answer to your question, you could add it as an answer instead. You are allowed to answer your own questions here. Jul 5 at 8:30

2 Answers 2

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Because the leaseholders own a single unit within a bigger building. Even once they become the collective owners of the freehold, they don't own all the leasehold units within the building — they only own their individual unit! There must be a lease which sets out the rights and responsibilities each leaseholder has towards each other, and to the collective freeholder.

Imagine a situation where a house split in two is bought by a couple, where each buys one flat. Then they buy the freehold and convert the property into one. Next, they extinguish the leases as the leases are no longer needed, so that the house would end up being just 1 freehold. But anywhere where there's a block of flats — and the owners are all random people — there must be leases to govern the rights of each individual flat, even if the owners do collectively own the freehold.

The leaseholders owning the freehold benefit by deciding the contents of their leases. This means these leaseholders could grant 999 year leases with no ground rent, leases that allow pets, etc. Such leases would increase the value of the properties, because those are favorable lease terms!

Additionally the flats must be held on individual leasehold titles, to enable them to be sold or mortgaged in the future.

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Because an owner cannot tell another owner what they can and can't do with their own property

The quoted paragraph clearly sets out some of the things the leasehold arrangement allows: "... set out the rights and responsibilities of the residents, such as funding the maintenance of the building and placing restrictions on antisocial behavior."

When you own land, you own it; and no one can tell you what you can and can't do with it, not even your co-owners (governments excepted). Want to run chickens? Sure: it's your land. Spinal Tap your stereo to 11 at 2 am? Sure: it's your land. Become a hoarder? Sure, it's your land.

When there's a single dwelling on the land, none of that is a problem. When there are multiple dwellings on the land, as in a block of flats (apartments for the Americans among us) then some of these are likely to be problematical. But they aren't problems the law cares about because you all own the property.

Different common law jurisdictions have arrived at different solutions to this problem but the UK has particular difficulties because people have been owning land there for a long time. A lot longer than in the USA, Australia or New Zealand.

This is quite an elegant solution: all the owners own the land but each of them have a lease over their own flat and that is a contract the law will enforce.

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    An important right of a leaseholder is the exclusive use of their flat. Without that, every freeholder could wander into their neighbours' flats whenever they liked, because they are all joint owners of it.
    – Simon B
    Jul 4 at 18:33
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    Does England not recognize party wall agreements and restrictive covenants? This would usually be done with a condominium declaration or party wall agreement or restrictive covenants in the U.S.? The requirement of a legal fiction rather than a more direct method is surprising.
    – ohwilleke
    Jul 4 at 19:07
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    Notably, New York City does similar things with “co-op” apartment buildings. I don’t own my apartment, I own shares in a company that owns the building—and one of the perks of being a shareholder in the company is exclusive use of the apartment associated with those shares. Done for exactly the same reasons. As far as I can tell, such arrangements are unusual outside of NYC in the US, though.
    – KRyan
    Jul 4 at 23:34
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    @KRyan Australia has a few “corporate title” buildings left but they can be problematical if one (or a small number) of “shareholders” gain a controlling interest. The Strata Titles Act solved that problem by effectively having titles within titles and from what I understand works similarly to a condominium in the US. The Community titles act goes further and can have a freehold within the community which can itself be another community or even a strata.
    – Dale M
    Jul 4 at 23:37
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    Restrictive covenants exist within English law and will do some of what is suggested. One exercise by my former Law Lecturer (Professor Edward Burn) was to discuss ways of getting around the problem that positive freehold covenants are generally unenforceable. Eg by enlarging a leasehold to a freehold. Estate rentcharges may also still be created and used in contexts like this. There are other possibilities. Jul 5 at 4:37

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