What is a leasehold estate?

A leasehold estate refers to a possessory interest in real property that is granted to a tenant by a landlord for a specified period of time. This arrangement allows the tenant to occupy and use the property as per the terms of the lease agreement while the property owner retains the ultimate ownership rights. Because the leasehold estate is not indefinite, as it is bound by the terms of the lease—typically ranging from a few months to several years—it distinguishes itself from freehold estates, which represent ownership that lasts for an indeterminate duration.

This concept is essential in real estate as it reflects the temporary nature of rental agreements, where tenants do not own the property but have the right to use it during the lease term. Understanding leasehold estates is crucial for both landlords and tenants to navigate their rights and obligations within rental agreements effectively.