Understanding Leasehold: How Leasehold Works

In the recent months, a term in real estate has been garnering attention because of the influx of affected people coming forward. The leasehold scandal has started national debates and worldwide discourse since it surfaced.

Since then, more people are getting into the basics and the terms of leasehold properties and how it works. Here is a summary of the way that this property ownership operates:

1. The property is valued. As with all property negotiation, the property is valued in terms of the real estate market. This property can be for commercial use or residential in nature. Once the value has been determined, interested potential lessees meet with a realtor or negotiate with the owner directly.

2. The lease period is determined. This is the time period that the lessee will utilize the property. This is not the usual annual or two-year frame but much longer than that. Properties for leasehold usually go for much longer. The shortest time frame for this is about 40 years.

3. The down payment is settled. Once the time period is settled, the lessee will now pay a down payment that will be determined through the negotiation. Since the lease is for a longer term, this is one way that the lessee confirms the commitment to his/her side of the deal.

4. The monthly lease is set. After the computed down payment is paid, the monthly payment will be scheduled. This is likened to the usual monthly due when renting an apartment. This will be computed in terms of the total lease amount and the time period.

5. The lease ends. After the time frame of the lease is over, the property now reverts back to the owner unless another contract is drawn up with new terms.

There are different upsides and downsides to this form of property ownership. The disadvantages have been more under the spotlight with the recent leasehold scandal but like any deals and agreements, it has a positive and a negative side.