Difference Between Leasehold vs Freehold
Leasehold refers to the type of ownership wherein the flat/home on the land is leased to flat-owner for a certain tenor (lease period) but ownership of the land belongs to the original owner/freeholder. Therefore, the home/flat- owner only holds the leasehold ownership on the property for the lease tenor and holds no ownership of the land. Freehold refers to ownership of both the property and the land on which the property has been built. In freehold, there is no time limit on the property as the land also belongs to the same owner. Freehold ownership is better as it does not have any uncertainties related to ownership issues or lease renewals, unlike leasehold ownership.
The common example of leasehold ownership is owning a flat by way of leasehold ownership wherein a flat owner has the ownership of the flat and not the land on which the flat has been built. Generally, the lease tenor is 99 years and above in most cases. The ownership of the land and lease renewal remains uncertain in the case of leasehold property after the expiry of the lease period.
An example of freehold ownership is owning a standalone property/house, wherein one purchases the property with freehold ownership. In the case of freehold ownership, the owner doesn’t need to go through the issues of expiry of lease and ownership post expiry, etc.
Head To Head Comparison Between Leasehold vs Freehold (Infographics)
Below is the top 11 difference between Leasehold vs Freehold
Key Differences between Leasehold vs Freehold
let us discuss some of the significant differences Between Leasehold vs Freehold :
- Leasehold is the type of ownership wherein the flat/home on the land is leased to flat-owner for a certain tenor (lease period) but ownership of the land belongs to original owner/freeholder. However, Freehold refers to ownership of both, the property and land on which the property has been built.
- Leasehold ownership has the disadvantage of uncertainty on ownership and renewal of a lease for the property. However, freehold ownership is free of any such uncertainty and ownership of the entire property clearly remains with the owner.
- One may need to pay annual land rent in case of leasehold ownership, which doesn’t hold true for the freehold.
- Leasehold ownership may require payment of maintenance fee for maintaining the society’s common infrastructures. However, in freehold ownership, the owner needs to maintain the property on its own and bear the expenses for the same.
- In leasehold ownership, there is a certain tenor for lease holding rights. However, in freehold ownership, the owner retains the ownership rights forever.
- In leasehold, the owner of the home may not be able to do major work in the property. However, in freehold ownership, there is no such restriction.
- Availing mortgage loan for a freehold property is relatively easier than leasehold property.
- Owners in case of freehold property have a lot more flexibility in selling or transferring the ownership.
- Cost of ownership for a leasehold property is relatively lesser than freehold property. Freehold properties are costlier due to the higher land purchase cost.
Leasehold vs Freehold Comparison Table
Let’s look at the top 11 Comparison between Leasehold vs Freehold
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|Particulars||Leasehold Ownership||Freehold Ownership|
|1||Definition||Leasehold ownership refers to ownership of the home/flat by way of lease rights. There are no ownership rights on land by the leaseholder.||Freehold ownership refers to ownership of the home/standalone building/property and land both by the owner.|
|2||Example||Owning a flat in an apartment/society on a leasehold basis.||Owning a standalone building on a freehold ownership basis.|
|3||Ownership after lease expiry||Ownership after lease expiry depends upon the renewal of the lease which largely remains uncertain.||In the case of freehold, ownership remains with the owner having freehold rights on the property/land.|
|4||Lease Period||Lease period in case of leasehold ownership is mostly more than 99 Years.||Not applicable.|
|5||Annual Rent for Land||In the case of leasehold ownership, the leaseholder may be required to pay certain rent towards land as he does not own land.||In the case of freehold ownership, the owner does not need to pay any rent to anyone as he owns the land and house both on a freehold basis.|
|6||The responsibility of Maintaining the Common Infrastructure||In leasehold arrangement, freeholder has the responsibility to maintain the society’s common infrastructure, however, the home owner’s may be required to pay for that.||In freehold ownership, the owner needs to maintain the property or related common infrastructure on its own and also bear the expenses for that.|
|7||Flexibility for any major work in the society premises||In the leasehold ownership, the owner of the flat may not be able to carry out major work in the society premises. However, he may do some changes in his own flat with certain restrictions.||The owner is free to do any major or minor work in case of freehold ownership.|
|8||Transfer of Property||In the case of leasehold ownership, transfer of property from one to another is relatively difficult and transfer of leasehold rights are done through power of attorney.||In freehold ownership, the owner has full legal rights to either transfer or sell the property and it is relatively hassle-free.|
|9||Mortgage Loan||It is relatively difficult than freehold ownership.||Banks or Financial Institutions take greater comfort because of freehold ownership in granting loans to freehold properties.|
|10||Cost of Ownership||Leasehold properties are relatively cheaper because of land being arranged on a lease.||Freehold properties are relatively costlier due to significantly higher land prices as land is purchased on a freehold sale basis.|
|11||Suitability||Leasehold properties are better suited for potential house owners with a relatively lesser budget.||If there are no budget constraints, freehold ownership is most desirable because of clarity of ownership and flexibility because of freehold ownership.|
Conclusion – Leasehold vs Freehold
Leasehold vs freehold ownership both is legal terms which describe the type of ownership of a property by the respective owner. In leasehold ownership, the flat/home on the land is leased to flat-owner for a certain tenor (lease period) but ownership of the land belongs to original owner/freeholder. Generally, the lease tenor is 99 years and above in most cases. Freehold refers to ownership of both the property and the land on which the property has been built. Freehold ownership is relatively better in terms of clarity on ownership, flexibility in selling the property and availing mortgage loan in comparison to leasehold ownership. Leasehold ownership is suitable for the cases where there is budget constraint otherwise freehold ownership is always desirable.
This has a been a guide to the top difference between Leasehold vs freehold. Here we also discuss the Leasehold vs Freehold key differences with infographics and comparison table. You may also have a look at the following articles to learn more.