🏡 What Is Leasehold in Real Estate? Definition & Examples

Leasehold is a type of property interest where a tenant has the right to use and occupy real estate for a set period of time under a lease. The tenant does not own the land; ownership remains with the landlord.

How Leasehold Works

In a leasehold arrangement, a person or business leases land or a building for an agreed period—often months, years, or even decades. The tenant gains the right to occupy and use the property, while the landlord retains ownership.

Key features of leasehold include:

  • The tenant has possession and use of the property
  • The landlord retains ownership of the land
  • Rights last only for the term of the lease
  • Lease terms determine fees, restrictions, and responsibilities
  • Improvements may revert to the landlord when the lease ends

Leaseholds are common in both residential and commercial real estate, especially in areas where land is owned by trusts or long-term landholders.

Types of Leasehold Interests

Real estate law recognizes several types of leasehold interests:

  • Estate for Years: Fixed-term lease with a specific beginning and end date
  • Periodic Tenancy: Renews automatically (e.g., month-to-month)
  • Tenancy at Will: Ends at any time by either party
  • Tenancy at Sufferance: When a tenant stays past the lease end without permission

Example of Leasehold in Real Estate

A homebuyer purchases a condo that sits on land owned by a private trust. Although they own the condo unit, they do not own the land beneath it. Instead, they lease the land for 50 years and pay a monthly lease fee. When the lease expires, ownership of improvements may revert to the landowner unless renewed.

Why Leasehold Matters for FSBO Sellers

  • Leasehold terms must be disclosed to buyers
  • Lease fees affect property value and marketability
  • Shorter lease terms may reduce buyer eligibility for financing
  • Understanding improvements and reversion rights prevents disputes

FSBO sellers should review their ground lease, note expiration dates, and clearly communicate all fees and conditions to potential buyers.

Selling a Leasehold Property FSBO?

List on the MLS and reach millions of buyers while saving thousands in commissions.

View Flat Fee MLS Plans →