Leasehold v Freehold – what’s the difference?

Freehold vs. Leasehold Ownership


Have you always wondered what the difference is between a freehold title and a leasehold title?  Here are some explanations to help you be more informed when purchasing a home.  There are always pros and cons to every situation.  Weigh them out and you will know what is best for you.

Freehold Ownership

-Owning the building and grounds it rests upon, meaning you have full use and control of the land and buildings on it, subject to any rights of the Crown, local land use bylaws and any other restrictions in place at the time of purchase.

-Gives the holder ownership of land and buildings for an indefinite period of time.

-Offers the most freedom of choice, from building design to yard work, providing it is within zoning, bylaw and permit limitations of the city to which you live.

-Homeowners are responsible for the maintenance of the building interior, exterior and yard including its costs.

Leasehold Ownership

-Ownership of the land, sometimes along with the buildings, remains with the landlord and the lease fee is payable on top of mortgage and property taxes, as well as condo fees.

-Gives the holder a right to use and occupy the land and buildings for a defined period of time but does not actually own it.

-Lenders may require higher down payments for leaseholds.

-Ownership is often set at 99 years but if you choose to sell your home in five years the next owner will have leasehold interest now for 94 years and so on.  You can only purchase the remaining portion.  The shorter the remaining portion the less you or the person who eventually purchases from you will be willing to pay for the leasehold interest.

-The closer you get to the end of the lease the more risk is involved depending on what the owner intends to do with the land/homes (ie: either re-sell a leasehold interest, redevelop, etc.)

-Leasehold ownership is used most often for townhouses or apartments built on city owned land, for single detached houses on farm land or First Nations reserves and for apartments where the owner of the freehold interest of an entire apartment block sells leasehold interests in individual apartment units to other owners.

-At the end of the term of the lease, the use and possession of the lands would revert to the band/owner. 

-Leaseholders may face other restrictions, such as not owning pets or subletting. If leaseholders don't fulfill the terms of the lease- for example, by not paying the fees- then the lease can become forfeit.

If you have any further questions feel free to direct them in the comments section below. 

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