🏠 What Is Leasehold Property in Real Estate? Definition & Examples

Leasehold property is real estate where the homeowner owns the building or improvements but does not own the land. Instead, the land is leased from a landowner, often for decades, through a long-term ground lease.

How Leasehold Property Works

With leasehold property, the buyer receives ownership of the home or structure but not the land it sits on. The homeowner agrees to pay a monthly or annual land lease fee to the landowner.

Key features of leasehold property include:

  • The homeowner owns the building or unit
  • The land is owned by a different party (often a trust or landholder)
  • A long-term lease (30–99 years) specifies rights and responsibilities
  • Property value may decrease as the lease term shortens
  • Financing may be limited for short remaining lease terms

Leasehold properties are most common in Hawaii, parts of California, tribal land areas, and certain condo or manufactured home communities.

Leasehold Property vs. Fee Simple Ownership

Leasehold ownership is different from fee simple ownership, where the buyer owns both the land and the improvements permanently.

  • Leasehold: Own the building, lease the land
  • Fee Simple: Own the land and the improvements outright
  • Leasehold: Value tied to remaining lease term
  • Fee Simple: Value based on market and location

Because ownership ends when the land lease expires, buyers must consider renewal terms and long-term costs.

Example of Leasehold Property

A buyer purchases a home for $350,000 in a community where the land is owned by a local trust. The buyer owns the home but must pay a monthly land lease fee of $850. The ground lease has 40 years remaining. As the lease gets shorter, the home's value may decline, and refinancing may become more difficult.

Why Leasehold Property Matters for FSBO Sellers

  • Lease fees and terms must be disclosed to buyers
  • Remaining lease length affects property value
  • Some lenders restrict financing for short leases
  • Ground lease rules may affect improvements, rentals, or resale

FSBO sellers should provide buyers with a copy of the ground lease and clearly explain all fees, expiration dates, and renewal options.

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