Leasehold vs Freehold

Leasehold means you own the buildings and improvements on a property, but you lease the land from a separate landowner. In New Zealand, common leasehold situations include properties on council-owned land, church land (especially in areas like Remuera and Parnell in Auckland), and land held under Te Ture Whenua Maori Act (Maori freehold land).

The major risk with leasehold is ground rent reviews. Ground rent is typically reviewed every 7-21 years and is reassessed based on current land values. In areas where land values have surged, ground rent can increase dramatically — sometimes by multiples of the previous rent. When the lease expires, the landowner is not obligated to renew it, and the buildings may revert to the landowner, though perpetual renewal rights exist on some leases.

Bank lending on leasehold can be very difficult. Many banks will not lend on leasehold properties at all, or will only lend if the lease has a long remaining term (often 50+ years). This significantly affects both purchasing and resale.

Freehold (fee simple) is the most complete form of land ownership in New Zealand. You own both the land and the buildings with no ground rent, no lease expiry, and no dependency on a separate landowner. Your ownership is permanent, subject only to government powers like rates, resource management rules, and compulsory acquisition.

Freehold is the benchmark title type. It commands the highest prices, is easiest for banks to lend against, and has the broadest resale market. For most buyers, freehold is the preferred option because of its simplicity and security.

This is an either/or choice. Leasehold can make sense if you want to live in a premium location at a lower entry price and you understand the risks. It is sometimes the only option in certain areas (e.g., some coastal or heritage locations). Freehold is the safer, more conventional choice. Before buying leasehold, get specialist legal advice on the lease terms, ground rent review mechanism, and expiry provisions.

If considering leasehold, your first step is to obtain and thoroughly review the lease document with a property lawyer experienced in leasehold. Key things to check: remaining lease term, ground rent review mechanism, renewal rights, and any restrictions on use or development. Compare the total cost of ownership (purchase price plus ground rent over time) against equivalent freehold properties.