Understanding Leasehold: The Basics

Part of growing into adulthood is the process of owning bigger and more substantial properties. Among the basic survival needs of every human is shelter. In our lifetime, we start buying sustenance (food) and clothing first and then we slowly move out and live on our own. When we start getting stable in finances, we start renting places to live and then we start planning property ownership.

Basically, in terms of living situations, we know two basic things – we either own our own space or we rent it. Looking into real estate a bit closer, we learn that there is another set of terms in owning properties called leasehold. This may have garnered a bit of attention after the leasehold scandal in the United Kingdom, but only a few people knew of this term before the national issue.

What is leasehold?

This is the middle ground between owning a property and renting. In basic terms, the idea is the same as renting a property from an owner. The difference lies on the period of time that the property is leased out.

Terms related to leasehold
  • Freeholder – also known as the lessor, he/she owns the property and the land it is on.
  • Lessee – he/she rents the property from the freeholder for a certain amount of time
  • Leasehold property – a commercial or residential property that is leased out to a person for a specific period of time by which end reverts back to the owner.
  • In many ways, the distinguishing elements of leasehold from ownership and the renting that we know of is mostly on specific terms of the agreement entered into by the parties involved. After the leasehold scandal that affected a lot of people in the past year, it pays to know the key ideas at play. As individuals, it is a must to value investments in any form. Most of our adult life we put in work to secure our future, so it is crucial to be informed.