What exactly is a Head Lease?

[prutovitz]

I have a rather simple question, what exactly is a head lease? My understanding is that it is a lease payment made directly from the tenant to the owner of the Freehold. Is that correct? Can someone give me an example?

Is it always the same, or are there different types of head leases?

Many thanks,

Phil

[jeffrey]

Freehold= as much ownership as one can hold (umlimited by time), subject only to the Crown's superior title.
Leasehold= ditto but limited by time (whether 999yrs. or one day!)
Head Lease (correctly used) = lease created by freeholder, esp. where there's an underlease too.
Underlease= lease created by leaseholder, usually for same period as leaseholder's Head Lease less the final x days.

You mention 'payment' but that's a consequence (not a definition). A lease/underlease reserves payments (from the person to whom it's granted) for:
a. 'ground rent'; and/or
b. service charge, if the person who grants it is responsible for delivery of services (e.g. block of flats: insurance, maintenance of common parts, etc.)

[Lawcruncher]

Don't be afraid! I am no threat to you

As you know, where conveyancing is concerned, I am happy to bow to your greatly superior knowledge. I am interested only in why there are never any simple answers.

I cannot think that it is simply because I am not a lawyer, that I find the answers complicated.

Your puzzlement is shared by many law students. In the latter part of my career I mentored trainee solicitors and they all said that they found land law the most difficult as it appeared to make little sense.

The answer to your question has two parts.

First, any branch of the law can be said to be at once simple and complex. The basic principles are simple, but complexities arise when you start looking at the exceptions and the exceptions to the exceptions. It is often thought that it is lawyers who complicate the law. Whilst there is some measure of truth in that, the fact is that the complexity of the law reflects the rich complexity of the affairs of man, not to mention human ingenuity. Further, it is not often appreciated that simple laws strictly applied lead to injustice.

Secondly, land law is something of an exception in that its basic principles, whilst not complex, are difficult to grasp as they appear to be grounded in rather abstract concepts. The reason for this is entirely historical and if you go far enough back in history you will reach a point where the principles made sense when you look at the way society was organised. It is not really possible fully to understand English land law without putting it in its historical context. This can be shown by looking at the concepts of tenure and estate.

The starting point for English land law is the Norman Conquest. William the Conqueror won England by right of conquest and had it at his disposal. Without going into the complexities of the feudal system, basically William granted land to his barons. He did not "give" land to them, but they held it as tenants. "Tenant" here has its original meaning of "one who holds" and does not imply the relationship of landlord and tenant. The land was held in exchange for rendering services to the king usually, but not necessarily, providing knights. The barons in turn granted part of their land to their own tenants in exchange for some service. Those tenants in turn might grant land to their own tenants and so the pyramid of the feudal system arose and with it the notion of "tenure". Tenure is a question of how or on what terms land is held. Tenure took a number of forms and over a period the provision of services came to be commuted to a payment of money. Over a further period the sums of money did not become worth collecting. That in due course lead to the number of types of tenure being reduced until the Law of Property Act 1925 struck the final blow and reduced the feudal tenures to one. As Megarry and Wade puts it: "Our law has preferred to suppress one by one the practical consequences of tenure rather than to strike at the root of the theory of tenure itself." A rather English way of doing things. All this means that there is one thing that has not changed since 1066: all land (other than land held in the royal demesne) is held from the Crown, though this is rarely of practical consequence.

If "tenure" answers the question: "How or on what terms is the land held?" then "estate" answers the question: "For how long is the land held?" Without going into this in detail, there were three freehold estates: a fee simple, a fee tail and a life estate, which could be for the life of the grantee or the life of another (known as pur autre vie) and one non-freehold estate, a term of years or lease.

When it comes to leases the position starts to get a bit confused because the relationship of landlord and tenant, or more properly when discussing land law in a historical context and because "tenant" has more than one meaning, lessor and lessee, was outside the feudal system. However, because the relationship of lessor and lessee closely resembled that of (feudal) lord and (feudal) tenant, leases came to be regarded as being capable of being both an estate and a form of tenure.

The Law of Property Act 1925 reduced the number of legal (see below) estates to two: the fee simple and the term of years. The position now is that:

1. For all practical purposes freehold tenure is the same thing as an estate in fee simple.

2. For most practical purposes leasehold tenure is the same thing as an estate for a term of years.

So, you may reasonably ask, why have I taken the trouble to set all the above out? First, I hope it helps explain terms such as "estate", "tenure", "fee simple" and "term of years" that property lawyers bandy about. Secondly, whilst many have had successful careers in conveyancing without understanding the doctrine of estates and tenures, if you understand it a lot of the apparent mysteries disappear. Thirdly, and in the context of this forum relevantly, it explains, I hope, why I insist that you can grant a tenancy to more than four tenants. If you understand that a tenancy can be both an estate and a form of tenure, you will appreciate that whilst the legal esate cannot be vested in more than four persons, as a matter of tenure you can still have more than four tenants - hence the appearance above of the word "most" in "for most practical purposes..."

I refer above to "legal" estates. Another concept that many law students have difficulty in grasping is the difference legal and equitable estates and interests in land. It is however lunchtime here in Spain and time I poured myself a glass of Rioja and so that explanation will have to wait for another time and will only be forthcoming following popular demand.

[mind the gap]

Perfectly comprensible; thank you!

[pilman]

Wow! Talk about going off subject.

The original poster wanted an answer to what is a head lease?

If I had just read the 19 preceding posts, I still would not know the answer to that question, if I had no prior knowledge of such a term.

I once saw an acronym of IMHO used in another forum so that's where I intend to start and explain this as though someone is only used to words in relatively common use.

Freehold land can be owned for ever.
The owner of that land can agree to allow another person to use it for a period of time.
He can do this by granting a Lease which is a legal deed that states the period of time that the land can be used for.

The freeholder is referred to as the Lessor, the person who grants a lease, while the person who can now use the land is referred to as the Lessee.
That person becomes the owner of a leasehold estate in the land for the length stated in the deed.
This is referred to as the Term of Years Certain.

Sometimes this can be for 999 years, but is still considered leasehold and there will also be a freehold estate owned at the same time for the same land.

This Lease is called the Head lease when the Lessee with 999 years of ownership agrees to grant a lease to another person for a lesser number of years.
This is then called a sub-lease or under-lease which means that there are now 3 people who own a legal estate in the land.
One owns it for ever.
One owns it for 999 years before he has to give it back.
One owns it for 99 years before he has to give it back.
Each leaseholder pays rent to the freeholder each year as mentioned in the lease agreement.

It doesn't stop there though.
Further sub-leases can be granted for any period less than the period that the previous lease granted.

At the top of this pyramid is the main man.
The Freeholder
Next below him is the Head Lease holder.

In a real example I saw recently.
The freeholder signed a lease that demised land for building purposes with a 999 year lease.
This became the HEAD LEASE after 6 Houses were erected on the land.
Each house was sub-leased to the person who wanted to live in the house and paid the builder his asking price.
Each house had a 998 year lease granted.
Each sub-lease is now registered with Land Registry, but not the Head Lease nor the Freehold.

Two of these houses are currently rented out on short term tenancies, so there are two further sub-leases in existence, but these do not need to be registered.

That is my attempt to clarify what a head lease is.
Only time, will tell if I have been relatively successful or perhaps prutovitz if he can still be bothered to read beyond #2 to #19

[Lawcruncher]

I think post number 2 explained it.

As Jeffrey said, "head lease" properly refers to a lease granted by a freeholder. The term only tends to be used when an underlease is subsequently granted and where it is necessary to distinguish between the lease "at the top" and all leases below, or where the possibility of there being an underlease is contemplated. Please confirm the lease is a head lease = please confirm the lease in not an underlease; the reply: The lease is a head lease does not imply that there is an underlease.

[shedbones]

Very interesting thread.

Would a Headlease always have the Freeholder directly above it?

Or is it feasible for another interest to be inbetween the Freeholder and a Headlease?

[jeffrey]

Very interesting thread.

Would a Headlease always have the Freeholder directly above it?

Or is it feasible for another interest to be inbetween the Freeholder and a Headlease?

'Head lease' is a colloquialism, not a technical phrase. It always means the 'top' lease, i.e. where L= freeholder.