Leasehold
A leasehold is an interest in real property held by a tenant under a lease agreement, granting the right to possess and use the property for a specified period while ownership remains with the landlord (lessor), making it a nonfreehold estate that is less than full ownership.
Exam Tip
Leasehold = possession without ownership (nonfreehold). 4 types: Estate for Years (fixed term), Periodic (auto-renews), At Will (no fixed term), At Sufferance (holdover). Estate for Years ends automatically; Periodic Tenancy requires notice.
What is a Leasehold?
A leasehold (also called a leasehold estate or nonfreehold estate) is a form of property tenure where a tenant has the right to occupy and use a property for a defined period under a lease agreement. Unlike freehold ownership (fee simple), the tenant has possession but not ownership of the property.
Leasehold vs. Freehold (Fee Simple)
| Aspect | Leasehold | Freehold (Fee Simple) |
|---|---|---|
| Ownership | Tenant has possession only | Owner has full title |
| Duration | Limited by lease term | Indefinite/perpetual |
| Control | Subject to lease terms | Full control (subject to law) |
| Transferability | May require landlord consent | Freely transferable |
| Value Over Time | Decreases as lease expires | Generally appreciates |
| Financing | May be difficult to mortgage | Standard mortgage options |
| Inheritable | Only remaining lease term | Yes, fully inheritable |
Types of Leasehold Estates
| Type | Description | Duration | Termination |
|---|---|---|---|
| Estate for Years | Fixed term lease | Specific start and end dates | Automatic at end date |
| Periodic Tenancy | Renewing periods | Month-to-month, year-to-year | Notice required |
| Tenancy at Will | No fixed term | Indefinite | Either party can terminate |
| Tenancy at Sufferance | Holdover tenant | After lease expires | Landlord can evict |
Estate for Years (Tenancy for Years)
| Feature | Description |
|---|---|
| Definition | Lease for a specific period |
| Duration | Can be days, months, or years |
| Termination | Ends automatically, no notice required |
| Example | 1-year apartment lease, 5-year commercial lease |
Periodic Tenancy
| Feature | Description |
|---|---|
| Definition | Automatically renews each period |
| Common Types | Month-to-month, week-to-week, year-to-year |
| Termination | Requires proper notice (usually one period) |
| Example | Month-to-month rental after initial lease expires |
Tenancy at Will
| Feature | Description |
|---|---|
| Definition | No fixed term, exists at will of both parties |
| Termination | Either party can end at any time |
| Notice | Reasonable notice typically required |
| Example | Staying with permission while looking for apartment |
Tenancy at Sufferance
| Feature | Description |
|---|---|
| Definition | Tenant stays after lease expires without permission |
| Legal Status | Not a trespasser but has no right to stay |
| Landlord Options | Evict or accept rent (creates periodic tenancy) |
| Example | Tenant refuses to leave after lease ends |
Key Rights of Leaseholders
| Right | Description |
|---|---|
| Possession | Right to occupy the property |
| Quiet Enjoyment | Right to use without landlord interference |
| Sublease/Assign | May transfer rights (if lease allows) |
| Improvements | May make changes (per lease terms) |
Limitations of Leasehold
| Limitation | Impact |
|---|---|
| Lease restrictions | Must follow lease terms |
| Rent obligations | Must pay rent or face eviction |
| No ownership buildup | Rent payments don't build equity |
| Approval requirements | May need landlord consent for changes |
| Financing challenges | Lenders may hesitate on short leases |
Commercial Leasehold Considerations
| Factor | Commercial Impact |
|---|---|
| Lease length | Often 5-25 years |
| Leasehold improvements | Tenant builds out space |
| Ground lease | Tenant owns building, leases land |
| Financing | Lenders want 70+ years remaining |
Exam Alert
Leasehold = POSSESSION without OWNERSHIP (nonfreehold estate). Know the 4 types: Estate for Years (fixed term, no notice to end), Periodic Tenancy (auto-renews, notice required), Tenancy at Will (either party ends anytime), Tenancy at Sufferance (holdover without permission). Fee Simple = freehold = full ownership. Leasehold = nonfreehold = tenant rights only.
Study This Term In
Related Terms
Fee Simple
Real EstateFee simple (also called fee simple absolute) is the most complete form of property ownership, granting the owner full bundle of rights including the right to use, sell, lease, or bequeath the property without restrictions, with ownership lasting indefinitely and passing to heirs.
Life Estate
Real EstateA life estate is a freehold ownership interest in real property that lasts only for the lifetime of a designated person (the life tenant), after which the property passes to another party.