Leasehold

Leasehold is a form of tenure where the occupier holds the right to use land for a defined period, paying ground rent to the landowner. Improvements on the land generally belong to the occupier, subject to the lease terms.

Why leasehold properties look cheap

Because the purchase price does not include the land. A leasehold apartment can appear dramatically better value than a comparable freehold one — and the gap reflects real risk, not a bargain.

The main risks

• Ground rent reviews. Rent is periodically reset, often to a percentage of current land value. Reviews can produce very large increases, sometimes multiples of the previous figure, and have caused severe financial distress for owners in Auckland and Wellington.
• Lending. Many banks restrict leasehold lending, require lower LVRs, or decline it. That limits your buyer pool at resale as well.
• Lease term. As the remaining term shortens, value falls and financing gets harder.
• Reversion. At lease end, improvements may revert to the landowner depending on the terms.

What to check before buying

The remaining term, the review mechanism and frequency, the date of the next review, the basis of calculation, and what happens at expiry. Have a lawyer read the lease in full, not a summary.

Common misunderstanding

Yield figures on leasehold can look excellent and be misleading, because they are calculated on a low purchase price while ground rent is a large ongoing cost that may step up sharply at the next review.

Perpetually renewable is not the same as fixed cost. The term may renew indefinitely while the rent resets to market each time.

Related terms

Last reviewed: 1 August 2026 · ---

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