Land: types of interest: leases, licences, easements, profits-à-prendre and commonhold
There are many interests in land which are lesser in nature than a freehold interest. The main ones, in England and Wales, are:
Brief descriptions of each of these interests follow below.
In Scotland, a real right over land is equivalent to a freehold interest. Leases also exist but the legal requirements to create them and their nature differ in Scotland. Licences in Scotland have a more limited meaning than in England and Wales. Servitudes in Scotland are broadly equivalent to easements in England and Wales.
Commonhold is a further interest in land and is described below.
A leasehold interest will entitle its holder to exclusive possession of the property for a particular term.
A freeholder may grant a lease of any duration. A leaseholder may, subject to the landlord’s consent, grant a sub-lease for any period less than the remaining term of the lease.
However if the holder of a lease is to have a legal interest in the land, the lease must be granted by deed. If it is not, the lessee will have, at best, only a beneficial interest in the land (although this will be the relevant interest for CGT purposes, see CG11730).
An agreement for the grant of a lease results in the lessee acquiring a beneficial interest in the land if:
- the lessee has given valuable consideration for the agreement; and
- the agreement is either in writing, or is supported by acts of part-performance, for example if the lessee occupies the property with the consent of the lessor.
For CGT purposes, there are special rules in TCGA92/SCH8 for dealing with leases, see CG70700P. For those purposes, the term `leases’ includes any licence or agreement for a lease.
A licence gives far more restricted rights than a lease. For example, it does not normally give an interest in land to the licensee, nor does it grant the right of exclusive possession.
There are three types of licences over land:
- a bare licence - such a licence is given without consideration on the part of the licensee and may be revoked at any time;
- a licence coupled with an interest - for example where the right to take standing timber from land is granted, a licence to go on to the land to cut the timber is necessarily implied;
- a licence of value - consideration is paid by the licensee but no interest in the land passes; for example a licence to enter a theatre to view a performance implied in the sale of a ticket.
An easement gives one landowner a particular right over the land of another. That right may be positive or negative, for example:
- a right of way over the land;
- a right to prevent the use of the land in a particular way.
A profit-à-prendre (commonly simply referred to as a profit) is the right to take something from another’s land, for example minerals or game. It does not however include the right to take cultivated crops (which are called ‘emblements’ in this context).
This interest in land was established in England and Wales from 27 September 2004 by the Commonhold and Leasehold Reform Act 2002, Commonhold Regulations 2004 and Commonhold (Land Registration) Rules 2004.
Where a building is divided into units, such as a block of flats, it is possible for individual units to be held as freehold interests with the common areas, such as stairwells, lifts, roofs, fences, drainage, leisure facilities, etc, held as a commonhold interest.
A commonhold will comprise; the unit holders, who have freehold interests in their individual units; the commonhold association having freehold interest of the common parts. All the unit holders will be members of the commonhold association, which will manage those common areas for the benefit of those unit holders. The unit holders therefore effectively own the commonhold association which holds the commonhold interest.