Leasehold vs Freehold
Freehold means you own the land outright. Leasehold means you own the buildings but lease the land from a landowner (council, church, iwi, or private entity) and pay ground rent. Leasehold is significantly cheaper upfront but carries ongoing costs and risks around lease expiry and rent reviews.
Side-by-Side Comparison
| Attribute | Leasehold | Freehold |
|---|---|---|
| Land ownership | You do not own the land — you lease it | You own the land outright |
| Ground rent | Ongoing payments to landowner (reviewed periodically) | No ground rent — you own the land |
| Typical price discount | 10-50% cheaper than equivalent freehold | Full market price |
| Lease expiry risk | Lease may not be renewed — buildings revert to landowner | No expiry — permanent ownership |
| Bank lending | Difficult — many banks decline or require short remaining term | No title-related lending restrictions |
| Common landowners | Councils, churches, iwi (Maori freehold land), private trusts | Not applicable — you are the landowner |
| Ground rent reviews | Can increase significantly at review (7-21 year cycles) | Not applicable |
| Resale market | Smaller buyer pool — harder to sell as lease shortens | Broad market — easiest to sell |
Leasehold Explained
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 Explained
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.
Do You Need Both?
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.
Which Should You Get First?
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.
Frequently Asked Questions
Can leasehold be converted to freehold?
Sometimes. If the landowner is willing to sell the land, the leaseholder can negotiate to purchase it and convert to freehold. This is called 'enfranchisement.' However, the landowner is under no obligation to sell, and the price may be high. Some council and church landowners have historically offered buyout programmes.
What happens when a leasehold lease expires?
It depends on the lease terms. Some leases include perpetual renewal rights, meaning the lease automatically renews (though ground rent will be reassessed). Others may not renew, and the buildings could revert to the landowner. Always check the specific lease terms with a lawyer before purchasing.
Related Terms
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.
Fee Simple
GlossaryThe legal term for freehold ownership — the most complete form of property ownership available in New Zealand.
Cross-Lease vs Freehold
CompareFreehold gives you full ownership of land and buildings with no co-owner dependencies. Cross-lease means shared land ownership with restrictions on changes — typically 5-15% cheaper but less flexible.
Unit Title vs Freehold
CompareUnit title is for multi-unit developments (apartments, townhouses) with shared common property and a body corporate. Freehold is standalone ownership with full control. Different products for different needs.
Cross-Lease vs Unit Title
CompareBoth are multi-unit ownership structures, but they work very differently. Cross-lease involves shared land ownership with a flats plan, while unit title has a formal body corporate with a unit plan under the Unit Titles Act 2010. Unit title is the modern standard; cross-lease is a legacy NZ structure being gradually phased out.
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