Difference Between Leasehold and Freehold

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The freehold property owner has unrestricted, undisputed, and absolute rights over his property. The owner is free to gift, sell, or transfer the ownership or responsibility of the land to whomever he wants. The owner can construct any structure in the freehold property. In a way buying freehold property is true of purchasing any real estate property. When someone owns a freehold property, he can modify or renovate the property without taking permission from anyone. That is why buying a freehold property requires more capital than owning a leasehold property.

A leasehold property is different from a freehold property. It is how a lessee owns the leasehold property. In the case of a leasehold property, there are two parties involved. One of them is the owner or lessorOwner Or LessorA lessor is an individual or entity that leases out an asset such as land, house or machinery to another person or organization for a certain period.read more who sells the property, and the other party is the lessee who buys the property. In a leasehold property, the owner (lessor) permits the lessee to hold the property for a limited period. A leasehold property can be leased for any duration of time. The lessee may be required to pay for the maintenance, improvement, and planning of the property depending on the clauses applicable.

The lease period can vary from 30 years to 999 years. Any lease with a duration of fewer than 90 years can cause a problem as it adversely affects the property’s valuation. Moreover, a lease whose duration is less than 30 years will face a challenge to warrant any bank finance. That’s why the lessee should ensure that the tenure is increased.

Leasehold vs. Freehold Infographics

Key Differences

  • In the case of freehold property, the owner has a full undisputed and unrestricted right over the property. In a leasehold property, the lessee does not have unrestricted and absolute right over the property.The owner does not require anyone’s permission or authorization to modify freehold property. In a leasehold property, the lesseeThe LesseeA Lessee, also called a Tenant, is an individual (or entity) who rents the land or property (generally immovable) from a lessor (property owner) under a legal lease agreement. read more needs to take permission and refer to the rights in the agreement to make any alterations.A freehold property does not have any term or time frame associated, but a leasehold property is leased for a specific period.

Leasehold vs. Freehold Comparative Table

Conclusion

The primary difference is the lessee’s freedom and restrictions put by the lessor and permission needed whenever the lessee wants to modify or construct anything on the property. A freehold property has no restrictions on whom to transfer what to alter and build in the property. Moreover, once bought, the right of the property is with the owner forever.

On the other hand, leaseholdLeaseholdA leasehold arrangement is one in which the property owner, also known as the landlord, leases out his property to another party for a fixed period of time. A lease agreement is a legal agreement between a person who takes a lease on a property (lessee) and the landlord (lessor).read more comes with several restrictions and clauses from the lessor. The lessee has got rights to the property only for the duration of the lease period, which is subject to extension. The investor in a leasehold property needs to take care of many moving parts, which encompasses factors like the lease period, valuation of the property, transfer clause, availability of the bank finance, approvals from the state authorities, and other relevant agencies wherever applicable.

Due to all these factors, it’s better to buy a freehold property than to buy a leasehold property. However, most of the time, the owner does not have a choice if he wants to buy a property in a preferred location as the properties of that entire location can be bought only as leased property.

This article is a guide to Leasehold vs. Freehold. Here we discuss the top difference between leasehold and freehold property and infographics and a comparison table. You may also have a look at the following articles –

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