Leasehold vs Freehold

In today’s article, we will be discussing the all-time favorite topic of leasehold versus freehold and what is the difference between these two types of property ownership in New Zealand. It is important to note that the type of ownership will directly affect what you can and cannot do with the property that you purchase. 

What is Leasehold?

If the ownership title of the land is leasehold, it means the land is owned by a third party, to whom you pay rent to. According to the conditions outlined in a lease, you buy the sole right to ownership of the property and the structures on it for a predetermined amount of time. If you purchase a leasehold property,  you have to pay ground rent to the landowner and the frequency of payment is set out by the landowner. You may also need to pay for other costs and expenses associated with the leasehold property.

When the lease comes to an end, you also have to give the land and structures back to the landowner in the conditions outlined in the lease. Whether you can sell your leasehold interest in the future or not is also greatly impacted by rising rent or shortening of the lease period controlled by the landowner. 

What is Freehold?

Freehold is usually also referred to as “fee simple”. Typically, this is the most common and basic kind of ownership in New Zealand. Having a freehold ownership title means that you own the land and anything that is built on it. There might be exceptions when there is registered or unregistered interest to the land and this will limit how you can utilise the property. For example, in the case of Easement, it allows other property owners to utilise your land for a specified purpose. In the case of Covenant, a limit is imposed to restrict the kind of properties that may be built on the land. 

The main advantage of freehold property is that you have full ownership of the property and land. You also do not have to need to pay for any ground rent, service charges or admin fees to the landowner. If you’re interested in looking for a freehold property either as a first home buyer or investor, do connect with our friendly client consultant now!