Updated July 31, 2023
Difference Between Leasehold vs Freehold
Leasehold refers to the type of ownership wherein the flat/home on the land is leased to the flat-owner for a certain tenor (lease period). Still, 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 no ownership of the land. Freehold refers to ownership of the property and the land on which the property has been built. The property has no time limit as the land belongs to the same owner in freehold. Freehold ownership is better as it does not have any uncertainties related to ownership issues or lease renewals, unlike leasehold ownership.
A common example of leasehold ownership owns a flat by way of leasehold ownership, wherein a flat owner owns the flat and not the land on which the flat has been built. Generally, the lease tenure is 99 years and above in most cases. Thus, the land ownership and lease renewal remain uncertain in the case of leasehold property after the lease period’s expiry.
An example of freehold ownership is owning a standalone property/house, wherein one purchases the property with freehold ownership. However, In the case of freehold ownership, the owner doesn’t need to go through the expiry of the 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 the flat-owner for a certain tenor (lease period), but ownership belongs to the original owner/freeholder. However, Freehold refers to ownership of 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 such uncertainty, and ownership of the entire property remains with the owner.
- One may need to pay annual land rent in case of leasehold ownership, which doesn’t hold for the freehold.
- Leasehold ownership may require payment of maintenance fees for maintaining the society’s common infrastructures. However, in freehold ownership, the owner must maintain the property independently and bear the same expenses.
- In leasehold ownership, there is a certain tenor for lease-holding rights. However, in freehold ownership, the owner retains the ownership rights forever.
- In a leasehold, the homeowner may be unable to do major work on the property. However, in freehold ownership, there is no such restriction.
- Availing of mortgage loans for a freehold property is relatively easier than for a leasehold property.
- Moreover, In the case of freehold property, owners have a lot more flexibility in selling or transferring ownership.
- The cost of ownership for a leasehold property is relatively lesser than for 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 Comparisons between Leasehold vs Freehold.
|Particulars||Leasehold Ownership||Freehold Ownership|
|1||Definition||Leasehold ownership refers to ownership of the home/flat through lease rights. However, there are no ownership rights on land by the leaseholder.||Freehold ownership refers to ownership of the owner’s home/standalone building/property and lands.|
|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 lease renewal, which remains uncertain.||In the freehold case, ownership remains with the owner having rights on the property/land.|
|4||Lease Period||The lease period for 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 a leasehold arrangement, the freeholder is responsible for maintaining the society’s common infrastructure. However, the homeowner may be required to pay for that.||In freehold ownership, the owner needs to maintain the property or related common infrastructure and bear the expenses.|
|7||Flexibility for any major work in the society premises||The flat owner may not do major work on the society premises in the leasehold ownership. However, he may make some changes in his flat with certain restrictions.||The owner can 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 is done through attorney power.||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 isn’t easy 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.|
However, Leasehold vs freehold ownership is a legal term that describes the type of ownership of a property by the respective owner. In leasehold ownership, the flat/home on the land is leased to the flat-owner for a certain tenor (lease period), but ownership of the land belongs to the original owner/freeholder. Generally, the lease tenure is 99 years and above in most cases. Freehold refers to ownership of the property and the land on which the property has been built. Freehold ownership is relatively better regarding clarity on ownership, flexibility in selling the property, and availing mortgage loans compared to leasehold ownership. Leasehold ownership is suitable for cases with a budget constraint; otherwise, freehold ownership is always desirable.
This has been a guide to the top difference between Leasehold vs freehold. Here we also discuss the Leasehold vs Freehold key differences with infographics and a comparison table. You may also have a look at the following articles to learn more.