Freehold vs Leasehold

It is imperative for aspirant property buyers to familiarize themselves with the numerous aspects related to ownership of property, before they start searching for a property to purchase.

Essentially, there are two basic types of ownership, leasehold and freehold. As per Sumit Jain, CEO of a real-estate portal CommonFloor.com, “A property is neither freehold nor leasehold; it is the nature of the rights and authorities enjoyed by a person over a property which makes it freehold or leasehold.”

Ownership of a freehold property:

Purchasing a freehold property bequeaths unrestricted, undisputed and absolute title, right and interest within a property.

Further these title, right and interest within the respective property isn’t time-bound.

Proprietors of such property can sell, transfer, gift, convey the same title, right and interest to any person or group as and when they desire.

Additionally, in the case of a freehold property, along with the land any structure or construction on the land as well as anything attached there to is by extension the owner’s sole property.

In the same way, purchasing an apartment or an entire floor within a building with freehold property rights, bestows rights over the plot of land on which the building is constructed as well. Howbeit, in such cases the ownership of the plot would be jointly shared with all the other owners of the respective flats within the building. The ownership would be shared in proportion in accordance with the ratio of the area owned out of the building’s consolidated built-up area.

Jain says, “Such ownership rights over a freehold property can be enjoyed by the owner forever, or till he or she willingly relinquishes his or her rights in favor of any other person. Relinquishing of ownership title, rights and interest could either be against a valid consideration (sale) or without one (gift).”

Ownership of a leasehold property:

Purchasing a leasehold property does not bequeath complete ownership rights to the property.

Under a leasehold, the original proprietor of the property authorizes the purchaser of the property to own and utilize the respective property for a predetermined purpose and period against a valid consideration.

The person on whom such authorities and rights are conferred is known as the ‘lessee’ and the property is a ‘leasehold’ property to him/her, while the ownership rights is retained by the original proprietor who is known as the ‘lessor’.

Generally, a lease duration is usually 30, 60, 99 or 999 years or for perpetuity.

Which one to opt for: 

Undoubtedly, a freehold property proves to be the most viable option for a buyer. There are numerous benefits and advantages of owning a freehold property.

The buyer possesses all the rights over the property as well as he can easily avail a home loan. Furthermore, it is way easier to sell or transfer a freehold property.

“If one has the option to choose between the two, he or she should obviously go for freehold property,” says Jain.