Leasehold vs. Freehold: What’s the Difference?

Published on August 11, 2022

So you’re looking at properties and have come across one that seems absolutely perfect—the right number of bedrooms and bathrooms, the location you want, and, most importantly, it’s within your budget. But you’re scrolling down the listing and see it’s a ‘leasehold’ property. What does that mean?

We’re here to give you a rundown of what a leasehold property is so you can decide if it’s the right type of property for you.

What Exactly is a Leasehold Property? 

A leasehold property is where one person or entity leases out the land, in part or in whole. Whoever leases the land is allowed to build or alter the land as they see fit, or as per the lease agreement. 

The lease is usually for an extended time period, typically anywhere from 50 to over 99+ years, and many leases allow the development of commercial and residential properties on the land while maintaining ownership of said land.

Who’s Who: Lessor vs. Lessee

According to the BC government:

“Leasehold owners are sometimes called the leaseholder or the lessee. It is ownership of a right of occupancy for the term of the lease.”

Basically, the lessee owns the lease and the property on the land, but not the land itself.

On the flipside is the ‘lessor’, who owns the land and leases it to the leaseholder. 

The Difference Between Leasehold and Freehold

Most real estate listings have homes labeled as either freehold or leasehold. 

A freehold property means you’re not only buying the structure, but you’re also buying the land it sits on. A leasehold means you’re buying the structure, not the land. It also means you’ll have to pay to lease your portion of that land. 

Benefits of Leasehold Land

There are many benefits to leasehold ownership.

More Affordable

Since you’re only buying the home, and not the land the home is built on, a leasehold is often much more affordable. This is a huge benefit for first-time home buyers—not only is the potential mortgage going to be much lower than freehold, but it also means that your down payment won’t be anywhere near as high either, which is one of the biggest barriers to home ownership.

Most of the Okanagan’s leasehold properties are available on the Westside, although there are a few leaseholds available in Kelowna and Lake Country as well. For the most up-to-date listings, please contact your realtor.

Leaseholds are Great for Vacations and Get-Aways

A leasehold is ideal for those looking for a vacation property. Being in an area like the Okanagan, many tourists may prefer renting a house or condo over paying for a hotel room. 

With a leasehold property, you’ll avoid the headaches of hotels, AirBnBs, and renting entirely. Instead, you’ll have an amazing recreational property just waiting for you at all times of the year so you can hit Big White during the winter and then be back in the summer for all the mountain biking, hiking, and watersports you can handle.

And if a leasehold is your getaway spot that you’re not living in throughout the year, you can even rent it out for several weeks or months for some extra income on the side.

leasehold vacation

Seniors and Fixed Incomes

Leasehold can be a good choice for seniors living on a fixed income as well. If they are independent enough to want to remain at home but don’t need a big house all to themselves, then a leasehold condo or apartment is an option. Because the lease is for decades as opposed to years, the rate won’t increase the way it does when you’re renting.

Things to Consider When Buying a Leasehold

A leasehold mortgage isn’t quite the same as your regular run-of-the-mill mortgage. There are a few more hoops to go through before you can get the funds to buy the home that’s on the property. 

Your mortgage broker and lawyer must have a copy of the master lease agreement and will need to review it thoroughly so you know what you’re signing up for. There may be some restrictions, such as on the length of amortization or the down payment, but your bank or mortgage broker can go into further details.

However, there are no restrictions or limitations on the resale of the property, so if you decide to move on and sell the home, you’re free to do so.

Talk to Your Realtor About Leasehold Land

There are many multi-unit properties in Kelowna and the surrounding area that fall into the leasehold category. A qualified realtor like The Mayne Brothers can help you decide if buying a leasehold property is the right choice for you. 

For more information, call 250-860-0303.



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