What is a head lease? Head lease, underlease and freehold explained

A head lease is the superior lease in a chain: the freeholder grants it, and the head leaseholder can then grant underleases beneath it. Here's how the chain fits together, how ground rent flows up it, and what to check when buying a property with a head lease above it.

If your title documents or a sale listing mention a head lease, it usually means the property you are looking at is part of a chain of interests rather than a simple freehold. A head lease is the superior lease: it sits directly beneath the freehold, and leases granted under it (called underleases) sit beneath it in turn. Once you can see the chain, the rest of the picture, who owns what and who pays ground rent to whom, falls into place.

What a head lease is

A head lease (sometimes written headlease) is a long lease that the freeholder grants to a head leaseholder. It is the most senior lease in the chain. Crucially, the head leaseholder does not just occupy the property: they hold the right to grant further leases, underleases, beneath their own. So the head lease is the link between the freehold above it and the occupiers below it.

A head lease is still a lease, which means it is time-limited. It runs for a fixed term set when it was granted, and any leases carved out of it must end before it does. It is not the same thing as owning the land outright.

The lease chain: freehold, head lease, underlease

The clearest way to picture it is a chain, running from the most senior interest at the top to the occupier at the bottom:

• Freeholder owns the land outright and grants the head lease.
• Head leaseholder holds the head lease and can grant underleases beneath it.
• Underlessee (the occupier) holds an underlease, often the owner of the flat or house, and is the person who actually lives in or uses the property.

An underlease (also called a sub-lease) is simply a lease granted out of the head lease. Because you cannot grant a greater interest than the one you hold, an underlease must always be shorter than the head lease above it. The same property can therefore carry a freehold, a head lease and several underleases all at once.

Head lease vs underlease vs freehold

These three interests often exist on the same property at the same time, so it helps to see them side by side.

How ground rent flows up the chain

In a head lease chain, ground rent can be payable at more than one level, and it flows upwards. A typical arrangement looks like this:

• the underlessee pays ground rent to the head leaseholder under the underlease;
• the head leaseholder pays ground rent to the freeholder under the head lease.

The amounts and the dates are set independently by each lease in the chain, so the rent the underlessee pays and the rent the head leaseholder pays up the chain need not be the same figure. This is exactly the position some portfolios sit in: the party in the middle of the chain collects ground rent from the underlessees below and pays a yearly sum to a superior landlord above under a head lease. Keeping track of both directions, money coming in and money going out, is part of administering this kind of arrangement, and it is built into how ChiefRent handles it.

Note that this is different from a freehold rentcharge or chief rent, which is a yearly sum charged on a freehold with no lease involved at all. If you are trying to work out which kind of payment applies to a property, our guide on Section 166 ground rent versus a chief rent sets out the difference.

Buying a property with a head lease above it

Buying a property where a head lease sits above your interest is common and, in most cases, perfectly fine. It does mean there is an extra layer in the ownership structure, so a buyer (and their conveyancer) will usually want to check a few things in the head lease, because its terms can affect you as the underlessee:

• How long the head lease has left to run. Your interest sits beneath it, so its remaining term matters.
• The ground rent payable up the chain and how (or whether) it can increase.
• Consents and restrictions. Some chains require the superior landlord's consent for things such as alterations, subletting or a further sale.

The disadvantages people most often worry about are the practical ones: needing a superior landlord's consent for certain actions, an additional layer of ground rent in the structure, and the head lease term running down over time. None of these is necessarily a problem, but they are the reasons a conveyancer reviews the whole chain before a purchase completes, so that the obligations are clear before you commit.

A note on scope: this is general information about how lease structures fit together, not legal advice on a particular property or purchase. The terms of each lease in the chain govern what actually applies, and a conveyancer or solicitor should review the lease chain before you rely on any of it.