Leasehold — Due Diligence Guide for NZ Buyers
Leasehold means you own the buildings but lease the land from a separate landowner (often a council, iwi, church, or trust). You pay ground rent for the right to occupy the land, and the lease has a fixed term.
How Leasehold Differs
| Attribute | Leasehold | Other Types |
|---|---|---|
| Land ownership | Leased from landowner | Freehold: Full ownership |
| Ground rent | Yes — reviewed periodically | Freehold: No |
| Purchase price | Significantly lower | Freehold: Full market price |
| Bank lending | Difficult — depends on lease term | Freehold: Standard lending |
Key Risks & Red Flags
Leasehold carries unique financial and legal risks:
- Ground rent increases: Rent reviews can result in significant increases, especially as land values rise.
- Lease expiry: If the lease isn't renewed, you lose the right to occupy and potentially the buildings.
- Bank lending: Many banks won't lend or will offer less favourable terms.
- Resale difficulty: Smaller buyer pool due to bank lending restrictions and lease complexity.
- Lease terms: Each lease is different — the devil is in the details.
Due Diligence Checklist
- Review the full lease document with a specialist lawyer
- Understand the rent review mechanism and history of rent changes
- Check the remaining lease term and renewal rights
- Assess bank lending availability for the specific lease
- Calculate the total cost of ownership including ground rent
- Research the landowner's track record with tenants
- Consider whether the lower purchase price justifies the ongoing costs and risks
- Standard checks: LIM report, building inspection, title review
Frequently Asked Questions
How much is ground rent typically?
Ground rent varies widely depending on land value and lease terms. It can range from a few thousand to tens of thousands of dollars per year. The rent review mechanism is critical — some leases use market rent reviews that can result in large increases.
Can I buy the freehold of leasehold land?
Sometimes. Some landowners will sell the freehold to the leaseholder, but they're not obligated to. The price would reflect the full land value. For iwi-owned land, sale of the freehold is generally not available.
Related Content
Leasehold
GlossaryA form of property ownership where you own the buildings but lease the land from a separate landowner for a set period.
Freehold
GlossaryThe most complete form of property ownership in New Zealand, giving the owner full rights to both the land and any buildings on it.
Cross-Lease
GlossaryA form of property ownership where multiple owners share the freehold of a single piece of land and lease their individual dwellings from each other.
Unit Title
GlossaryA form of property ownership for apartments, townhouses, and other multi-unit developments where each owner holds title to their individual unit and shares ownership of common property.
Freehold
Property TypeFreehold (fee simple) is the most complete form of property ownership in New Zealand. The owner has full rights to the land and any buildings on it, with no co-owner dependencies or lease arrangements. Freehold is the most common and most straightforward title type for standalone houses.
Cross-Lease
Property TypeCross-lease is a uniquely New Zealand form of ownership where multiple owners share the freehold of a single parcel of land and lease their individual dwellings from each other. Each owner's dwelling is defined by a flats plan registered with LINZ.
Unit Title
Property TypeUnit title is the standard ownership structure for apartments, townhouses, and multi-unit developments in New Zealand. Each owner holds title to their individual unit and a share of common property, managed by a body corporate.
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