What Does Leasehold Mean?

When you hear leasehold, it might sound a bit technical, but at its core, it’s simple. A leasehold property is one where you own the building or home, but not the land beneath it. Instead, you hold the right to live in or use that property for a set number of years under a legal agreement with the landowner (the freeholder). In contrast, freehold ownership means you own both the building and the land outright.

How Does Leasehold Work in New Zealand?

In New Zealand, leasehold arrangements can vary widely:

• Lease Term: Could be short (e.g., 20 years) or very long (up to 999 years).

• Ground Rent: You pay an annual rent to the landowner, sometimes called ground rent, which may be reviewed every few years.

• Ownership Rights: You own the building (home or other building) and any improvements, but not the land itself.

• Registration: The lease is recorded on the title, clearly outlining rent review dates, obligations, and the lease’s expiry.

Lease Term: Could be short (e.g., 20 years) or very long (up to 999 years).

Ground Rent: You pay an annual rent to the landowner, sometimes called ground rent, which may be reviewed every few years.

Ownership Rights: You own the building (home or other building) and any improvements, but not the land itself.

Registration: The lease is recorded on the title, clearly outlining rent review dates, obligations, and the lease’s expiry.

What Are the Advantages of Leasehold Properties?

Choosing to buy a leasehold home or investment property can make sense in some situations:

• Lower Purchase Price: Leasehold properties often cost less than equivalent freehold ones, making them more accessible for first-time buyers or investment buyers.

• Prime Locations: You can live in sought-after Auckland or waterfront Christchurch suburbs at a fraction of the freehold cost.

• Defined Obligations: Lease terms outline your responsibilities clearly—maintenance obligations and rent reviews are set out in advance.

• Potential Appreciation: If the lease term is long enough, rising property values in the area can still benefit leaseholders when they sell.

Lower Purchase Price: Leasehold properties often cost less than equivalent freehold ones, making them more accessible for first-time buyers or investment buyers.

Prime Locations: You can live in sought-after Auckland or waterfront Christchurch suburbs at a fraction of the freehold cost.

Defined Obligations: Lease terms outline your responsibilities clearly—maintenance obligations and rent reviews are set out in advance.

Potential Appreciation: If the lease term is long enough, rising property values in the area can still benefit leaseholders when they sell.

What Are the Disadvantages of Leasehold Properties?

Leasehold isn’t without its risks. Consider these cons carefully before committing:

• Rent Reviews: Ground rent may increase, sometimes substantially, on review dates (often every 5–10 years), affecting affordability.

• Limited Security: As the lease term shortens, a property can become harder to sell and may lose value.

• Restrictions: You may face limits on alterations or subletting, depending on the lease.

• End of Lease: When the lease ends, ownership of building and land reverts to the freeholder—unless you negotiate an extension or renewal.

• Financing Challenges: Some lenders hesitate to offer mortgages on shorter lease terms or properties with under 50 years remaining.

Rent Reviews: Ground rent may increase, sometimes substantially, on review dates (often every 5–10 years), affecting affordability.

Limited Security: As the lease term shortens, a property can become harder to sell and may lose value.

Restrictions: You may face limits on alterations or subletting, depending on the lease.

End of Lease: When the lease ends, ownership of building and land reverts to the freeholder—unless you negotiate an extension or renewal.

Financing Challenges: Some lenders hesitate to offer mortgages on shorter lease terms or properties with under 50 years remaining.

How Does Leasehold Compare to Freehold and Unit Title?

Understanding where leasehold fits among other ownership types helps you make an informed choice:

What Should You Consider Before Buying a Leasehold Property?

Before putting in an offer, run through this quick guide:

• Lease Length: Aim for at least 99 years remaining to safeguard value.

• Rent History: Check past rent reviews and projected increases.

• Review Clauses: Are increases market-linked or fixed percentage?

• Alteration Rights: Can you renovate or extend?

• Exit Options: Is a lease extension available, and at what cost?

• Body Corporate Rules (if unit title): Understand common property obligations.

Lease Length: Aim for at least 99 years remaining to safeguard value.

Rent History: Check past rent reviews and projected increases.

Review Clauses: Are increases market-linked or fixed percentage?

Alteration Rights: Can you renovate or extend?

Exit Options: Is a lease extension available, and at what cost?

Body Corporate Rules (if unit title): Understand common property obligations.

Where Are Leasehold Properties Common in Auckland and Christchurch?

While freehold homes dominate, you’ll find leasehold in specific niches:

• Auckland CBD and Waterfront: Many apartments sit on leased land, offering proximity at a lower entry price.

• Christchurch Suburbs: Some older subdivisions and commercial buildings use leasehold to manage communal land ownership.

• Holiday Parks and Resorts: Common in coastal areas for cabin sites, where land is held by the operator.

Auckland CBD and Waterfront: Many apartments sit on leased land, offering proximity at a lower entry price.

Christchurch Suburbs: Some older subdivisions and commercial buildings use leasehold to manage communal land ownership.

Holiday Parks and Resorts: Common in coastal areas for cabin sites, where land is held by the operator.

How Do Leasehold Rents and Reviews Affect You?

Ground rent reviews are a core feature:

• Frequency: Typically every 3–10 years.

• Calculation Basis: Market rental value or pre-agreed formula.

• Impact: Sharp increases can hurt budgets; always forecast potential hikes.

• Negotiation: Larger leaseholders sometimes negotiate caps or staged increases.

Frequency: Typically every 3–10 years.

Calculation Basis: Market rental value or pre-agreed formula.

Impact: Sharp increases can hurt budgets; always forecast potential hikes.

Negotiation: Larger leaseholders sometimes negotiate caps or staged increases.

What Are the Costs and Investments Involved?

Beyond purchase price, budget for:

• Annual Ground Rent: May start low, but review dates can spike it.

• Maintenance: You manage and pay for building upkeep.

• Legal Fees: Review or extend a lease—costs vary by complexity.

• Valuations: Often required at review time to set new rent.

• Finance Premiums: Some lenders charge higher rates for shorter leases.

Annual Ground Rent: May start low, but review dates can spike it.

Maintenance: You manage and pay for building upkeep.

Legal Fees: Review or extend a lease—costs vary by complexity.

Valuations: Often required at review time to set new rent.

Finance Premiums: Some lenders charge higher rates for shorter leases.

How Can You Manage Leasehold Cons and Risks?

To keep your leasehold property on solid ground:

• Lease Extension: Engage early—longer terms sustain resale value.

• Cap Negotiations: Seek rent caps in renewal clauses.

• Professional Advice: Lawyers and valuers help you foresee costs.

• Stay Informed: Monitor local market trends in Auckland and Christchurch land values.

• Consider Freehold Conversion: In rare cases, freeholders sell the land outright.

Lease Extension: Engage early—longer terms sustain resale value.

Cap Negotiations: Seek rent caps in renewal clauses.

Professional Advice: Lawyers and valuers help you foresee costs.

Stay Informed: Monitor local market trends in Auckland and Christchurch land values.

Consider Freehold Conversion: In rare cases, freeholders sell the land outright.

Conclusion: Is Leasehold Right for You?

Leasehold properties offer an affordable path into prime locations like Auckland or Christchurch—but they demand careful planning. Understanding the leasehold meaning, rent reviews, and lease lengths is vital to avoid surprises. By weighing pros against cons and seeking expert advice, you can decide whether leasehold or freehold aligns with your goals and budget.

For tailored guidance on leasehold and property matters in New Zealand, visit Surani Associates: https://suraniassociates.co.nz/.

Works Cited

Glaister Keegan. “Leasehold Land.” Glaister Keegan, 6 months ago, www.glaisterkeegan.co.nz/articles/leasehold-land. Accessed 10 June 2025.

“Leasehold Property – Pros, Cons and Must-Know Facts.” MoneyHub, 13 Sept. 2024, www.moneyhub.co.nz/what-is-leasehold-property.html. Accessed 10 June 2025.

“Leasehold Property in New Zealand.” MortgageLab, May 2025, www.mortgagelab.co.nz/blog/understanding-leasehold-property-ownership-in-new-zealand. Accessed 10 June 2025.

“What Does Leasehold Mean?” TradeMe Property, 2023, www.trademe.co.nz/c/property/article/what-is-a-leasehold-property-in-nz. Accessed 10 June 2025.

“What Is a Leasehold Property in New Zealand?” Wise Move, www.wisemove.co.nz/post/what-is-a-leasehold-property-in-new-zealand. Accessed 10 June 2025.

“Strata Title.” Wikipedia, 10 Aug. 2024, en.wikipedia.org/wiki/Strata_title. Accessed 10 June 2025.

Frequently Asked Questions

1. What is the main difference between leasehold and freehold?

Leasehold means you own the building or home but rent the land under it for a set period. Freehold means you own both the building and the land outright.

2. How long do leasehold terms typically last?

In New Zealand, lease terms can range from 20 years up to 999 years. Most residential leaseholds are between 50 and 150 years.

3. What happens when a lease ends?

When the lease expires, ownership of the building and land returns to the freeholder—unless you negotiate an extension or renewal before the end date.

4. Can the leasehold ground rent increase?

Yes. Ground rent is usually reviewed every 3–10 years and can rise based on market rates or a fixed formula outlined in the lease.

5. How can I protect my investment in a leasehold property?

• Aim for at least 99 years remaining on the lease.

• Negotiate rent caps or staged increases.

• Factor in review dates when budgeting.

• Seek expert advice on extensions and valuation.

Aim for at least 99 years remaining on the lease.

Negotiate rent caps or staged increases.

Factor in review dates when budgeting.

Seek expert advice on extensions and valuation.