Freehold Vs Leasehold: What Buyers Should Know

In India, there are considered to be two different kinds of properties, i.e., leasehold and freehold. When it comes to both of them, there are various differences with regard to their sale, ownership and purchase. It is important to know the variations between leasehold and freehold property because they play an important part in ownership. Hence, in this blog, we have researched extensively and have penned down the important nitty-gritty of the same.

What Does Freehold Property Entail?

When it comes to freehold property, this is where the buyer a total ownership of the land or property, where there is no extra ground rent. When you buy a freehold property, you have total ownership rights and also total control. When there is total ownership, you can make any type of changes in the property where there are zero restrictions. In addition to this, you can also transfer or sell the property, as per your convenience. The ownership depends upon your decision and will remain the same until you want to modify it.

Apart from this, there is an absence of ground rent; therefore, you will only have to pay additional expenses, costs, or charges like maintenance costs, renovation, and repair expenses. When you have total control over the property, you can do any kind of improvements and alterations where there are no documents or permission are needed. As mentioned in the name, the freehold property is said to be free from all types of holdings. There are no restrictions when you own the property. There are a lot of benefits when it comes to this type of property, such as long-term investment, where the value of the real estate increases over time, and there are no costs concerning the lease.

What Does Leasehold Property Include?

With regards to the leasehold property, you only own the building for a limited period of time. The land and the property are owned by the landlord, who is a freeholder. There is an agreement called the lease agreement, which includes the period of ownership, which can be for a very long period of time. After the lease period has expired, the ownership of the property is given back to the landlord, where you will not have any ownership towards the real estate. But, if you want, you can also extend the period of the lease with the landlord, who is the freeholder, if needed.

This is a type of property ownership where you can only use the property for a limited period of time and according to the lease agreement. In this agreement, you will get to know about your rights and also about your responsibilities, which is inclusive of rules and regulations on how to take care of the property. You will need to pay ground rent on a regular basis, and there might also be additional charges for the maintenance, which are according to the terms and conditions. With regards to purchasing a leasehold property, there are particular documents which are needed to make sure there is seamless transfer of ownership.

How to Convert a Leasehold Property Into a Freehold Property?

Changing your leasehold property into a freehold property has a lot of benefits, but in order to make the transition, you need to submit an application to the government agency that has been overseeing the real estate. You should also prepare a sale agreement which mentions the terms between the property owner and the leaseholder. After this, you should draft a final conveyance deed, which is on the non-judicial stamp paper, where it mentions the sale considerations that have been agreed upon. The conveyance deed should be registered at the registrar’s office that is local. The final step is to make sure that the property has been transferred officially in your name, and it should be mentioned in the records of the local civic body.

The Application of Legal Aspects to Freehold and Leasehold Properties

When it comes to the freehold and leasehold properties, they are completely governed by the legal structures that are distinct in nature. Each of them has its own type of rules and regulations. Being central to freehold and leasehold arrangements are the contracts which tell about the rights and responsibilities of all people involved. For the leasehold real estate, this is inclusive of rent specifics, lease duration, and obligations regarding maintenance. With regards to the freehold agreements, although it is minimally restrictive, there are usage rights and property boundaries to it.

Leaseholders can occupy and use the property within the terms of the lease, and it is inclusive of maintaining the property and paying rent. Although freeholders have extensive ownership rights, they should abide by the rules and regulations and laws with regards to the property use. In addition to this, the tribunal can provide a lot of decisions on various issues like fair service charges, lease extensions, and other leaseholder rights. This ensures that there is an equal approach towards ownership and leasehold management.