Leasehold
A leasehold is a form of property tenure where a tenant holds rights to use and occupy land or buildings for a specified period under the terms of a lease, while the landlord retains ownership of the underlying real estate. Leasehold properties can be bought and sold, but the buyer acquires only the remaining lease term, not the underlying land ownership. When the lease expires, the property typically reverts to the landlord unless the lease is renewed.
Example
“The apartment was sold as a leasehold property with 75 years remaining on the ground lease.”
Memory Tip
You 'hold' the lease - you possess the property but don't own the land underneath.
Why It Matters
Understanding leasehold arrangements is crucial because leasehold properties often sell for less than comparable freehold properties, and buyers must consider lease expiration dates when evaluating long-term value. Financing leasehold properties can be more challenging, and lease terms may restrict modifications or require ground rent payments.
Common Misconception
Many buyers assume that purchasing a leasehold property gives them permanent ownership rights, but they only own the right to occupy the property for the remaining lease term.
In Practice
An investor purchases a leasehold condominium with 75 years remaining on the ground lease, paying below-market price due to the leasehold status. They must pay annual ground rent to the landowner and understand that as the lease term shortens over time, the property value may decline unless the lease can be renewed.
Etymology
From Middle English, combining 'lease' with 'hold' (meaning 'to possess'), reflecting the tenant's right to 'hold' or possess property for a specific period.
Common Misspellings
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