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There are four different types of property ownership which we call “tenure”, these are explained below.
Another approach is for a limited liability company to own the freehold of a property (say a block of flats) and for shares in that company to be sold entitling the owners of those shares to exclusive use of certain parts of the company’s property (for example apartments within that block of flats). The owner of shares in a company does not own “realty”.
Because shares are not realty it was originally difficult to secure finance against shares in a company (although that problem has long since been overcome) so an alternative means was established in the early 1990’s following the enactment of a law known as “Loi (1991) sur la co-propriete des immeubles batis” (the Flying Freehold Law). This Law provided a mechanism by which a freehold property can be transferred into the collective ownership of an association of members. In that way it has many similarities to share transfer property as the “flying freehold association” and the “share transfer company” perform a similar function. The significant difference is that each member of a flying freehold association becomes a freehold co-owner of the association property and therefore owns “realty”. The co-ownership is specified in set proportions in a document called a declaration of co-ownership which grants each member with exclusive rights to a specified part of a building.
The “articles of association” of a share transfer company and the “declaration” of a flying freehold association both provide for the subdivision of the property and a constitution and rules for the administration of the property.
With Leasehold, Share Transfer and Flying freehold property there is a community arrangement amongst the owners and there will be periodic payments to be made towards the maintenance and running costs of the block. With the latter two, costs such as rates and buildings insurance are also shared.
A freehold owner of a property is the owner of that property and by legal maxim he also owns everything above and below his property within its boundaries and is solely liable for any associated maintenance costs. The owner of a freehold property is said to own “realty” and must have a separate will to deal with that.
For centuries this system served the island adequately; however the law as it stood was found wanting when apartments were offered for sale because there are different owners on different levels (or floors) above the same land.
The first approach in response to this inadequacy was to grant long contract leases for particular apartments, but for the Jersey-man this was seen to be unattractive as the value of a leasehold property reduces as the duration of the lease reduces. Lending bank’s have recently fallen in with the Jersey-man’s view and will not now accept leasehold properties as security for mortgages unless there is a long term remaining on the lease, far exceeding the proposed duration of the mortgage.