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What is Leasehold Property? Everything You Need To Know

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Are you looking to purchase a property, but the term "leasehold property" has left you feeling a bit uncertain? Well, you're not alone. Leasehold ownership can be confusing, but it's essential to understand what it means before investing in a property.

A leasehold property is generally an ownership where you purchase the right to occupy and use the property for a fixed time. However, unlike freehold properties, you don't own the land outright, so you lease it from the freeholder.

In this blog post, we will explore leasehold ownership in more detail, discussing its advantages, disadvantages, and everything else you need to know before making a decision.

What is Leasehold Property?

Let’s begin with understanding the meaning of leasehold property.

Leasehold property is a type of ownership where you purchase the right to use a property for a fixed period of time. In this type of ownership, the land is not owned by the buyer but is instead leased from the freeholder. It means you have the right to occupy and use the property, subject to certain conditions, but do not own the land.

Leasehold Property Features & Overview

Now that we have clarity on the meaning of leasehold property, let’s take a look at the key features of leasehold properties:

  • Leasehold ownership means you purchase the right to use a property for a fixed period
  • The length of the lease is generally from 25-30 years
  • The land is leased from the freeholder, meaning you don't own it outright
  • Leasehold ownership is common for flats, apartments, and commercial properties
  • The lease agreement outlines conditions and restrictions for using the property
  • The freeholder is responsible for maintaining the building structure and common areas
  • Ground rent and service charges may be payable to the freeholder

Leasehold ownership can offer more affordable property options but may also have advantages and disadvantages.

leasehold property advantages and disadvantages

Advantages and Disadvantages of Leasehold Property

Leasehold ownership is an excellent way of owning property that has its own set of advantages and disadvantages. Here's a table to help you understand both aspects of leasehold property:

AdvantagesDisadvantages
Generally, more affordable compared to freehold propertiesLimited control over the property, as the land is leased from the freeholder
Maintenance and repairs of the building structure and common areas are the responsibility of the freeholderThe lease agreement can contain restrictions and conditions for using the property, which can limit your freedom
Access to shared facilities, such as gardens, gyms, or parking areasGround rent and service charges can increase over time
  
Leasehold properties are often found in prime locations, especially in urban areasPotential for disputes with the freeholder or other leaseholders over maintenance or service charges.

Most importantly, leasehold ownership makes it easier to obtain a secure loan from NBFCs like Hero FinCorp.

Also, let's have a look at the table below to get a better understanding of the difference between freehold and leasehold:

 Freehold OwnershipLeasehold Ownership
OwnershipYou own the land and property outrightYou own the right to use the property for a fixed period, typically several decades
Time LimitNo time limit on ownershipThe lease has a fixed time period, which may be extended or renewed
ControlYou have complete control over the propertyThe lease agreement may contain restrictions on what you can do with the property
Maintenance and RepairsYou are responsible for all maintenance and repairsThe freeholder is responsible for maintaining the building structure and common areas
Ground Rent and Service ChargesNo ground rent or service charges to payGround rent and service charges may be payable to the freeholder
Initial Purchase PriceMore expensive initial purchase priceGenerally, more affordable compared to freehold properties
Type of PropertyMore common for houses or any personal purposeMore common for flats, apartments, and commercial properties

What Home Buyers of Leasehold Properties Can Do?

If you are buying a leasehold property, there are several things you can do to protect your investment.

  1. Firstly, read the lease carefully and understand your rights and responsibilities.
  2. Secondly, ensure you have a reliable and experienced lawyer who can advise you throughout the process.
  3. Thirdly, consider buying the freehold or extending the lease if possible.

property sale to buy

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Is Leasehold Property Safe to Buy?

Yes, leasehold property can be safe to buy, provided you take certain precautions. Always read the lease agreement carefully and understand your rights and responsibilities as a leaseholder. It's also important to choose a reliable developer and lawyer and consider buying the freehold or extending the lease if possible.

How long is a Lease?

In India, the length of a leasehold property depends on the agreement between the leaseholder and the freeholder. Residential leases are typically for 25-30 years and can vary as per the property owner. However, the actual length of a lease can be negotiated between the parties involved in the lease agreement.

What happens when a Lease ends?

When a lease ends, the leaseholder typically has to vacate the property and return it to the freeholder. However, the leaseholder may have the option to extend the leasehold or purchase the freehold, depending on the terms of the lease agreement.

Conclusion

Leasehold property can be an attractive option for homebuyers looking for an affordable way to own a property. While certain advantages and disadvantages are associated with leasehold ownership, understanding your rights and responsibilities can help you protect your investment.
 
Additionally, it's essential to choose a reliable property owner and consider buying the freehold or extending the lease if possible. Furthermore, you can also avail Loan Against Property (LAP) from Hero FinCorp based on the value of your leasehold property. We provide LAP to self-employed and business owners for up to Rs 8 crore, depending on the market value of their property, at attractive interest rates and extended tenure of up to 10 years. We can provide 75% of the mortgaged property value to the applicant. If you are looking for a loan against your property, apply now!


 
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