What is the Difference between Leasehold vs Freehold Property?

Freehold and leasehold are two types of formal or legal ownership of a property. In simple terms, a freehold property is inherited for life, whereas a leasehold property is inherited for a specific period of time or lease.

Definitely, standard definitions do not define these legal titles very ‘clearly’. You will get a better idea through the thorough discussion made and their difference as leasehold vs freehold properties in the piece below. Keep reading to know more.

A freehold property, as the term defines itself, is property which is 'free from any hold' or limitation. An owner acquires the rights of the land and property for a lifetime. The rights also extend to future selling of the property to another buyer or transfer of ownership to their legal heir.

A leasehold property, as can be comprehended from the term itself, is a property under a lease or an agreement for a specific period of time. In case of a leasehold property, the ownership of only the property is transferred for a period of anywhere between 30 to 99 years, not the land on which it is built.

 

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Converting a leasehold property to a freehold property requires minimal documentation and some charges to be paid to the authority. You should have the General Power of Attorney, sales deed and a NOC in case your property is under mortgage or rent. If you're residing in Delhi, you can get it done only by submitting the General Power of Attorney and a registered agreement to sell. In case of a non-sanctioned building plan, you can get the property converted on the basis of house tax assessment or proof of permanent electricity connection.

You will need to submit the documents mentioned below to convert a leasehold property into a freehold property:

• General Power of Attorney
• No Objection Certificate if the property is mortgaged
• Copy of sub-lease deed or lease deed
• Copy of sale of agreement
• Demand letter as provided by the Government
• Proof of ownership such as property tax receipts
• Copy of power of Attorney

Apartments or flats cannot be freehold property. They are built on the same land where every apartment owner is a shareholder.

When it comes to comparing leasehold and freehold properties, it is not easy to determine which is better and mostly depends on the owner. However, following are some of the advantages of both types of properties, based on which you can make your own decision.

Scenarios where leasehold property will be a more feasible option:

• You wish to live in an easily accessible place in the city but cannot afford the cost of a land in such areas.
• You do not have clear concepts of the legal aspects and do not want to get involved in any legal hassle.
• There is a possibility of you moving from one place to another.
• You are a business owner and need a spacious land housing a building to run operations.

Scenarios where freehold property would be a better option:

• You plan to invest in a property.
• You have a family and future plans to settle in.
• You need a property from where you can earn in future by keeping it as a mortgage or by renting it out.
• You plan to modify the property you want to invest in.

Now that you have gained clarity on the two types of property and also on leasehold vs freehold, you can make your investment choices more precisely.