Property and Mortgage

Leasehold Property: The Trap in the Fine Print

🏢 Why the cheap listing may not be a bargain

Every so often a property appears on the market at a price that looks too good to be true, well below anything comparable nearby. Often the reason is buried in one word on the listing: leasehold. With a leasehold property you own the building and any improvements, but you do not own the land underneath. Instead you lease it from the landowner, which might be a council, a church, an iwi, a trust or a private owner, and you pay them ground rent for the right to be there. That single difference changes almost everything about the deal. The purchase price is lower because you are buying less, the ground rent is an ongoing cost that can rise sharply at review dates, the lease has a term that affects what happens years from now, and banks are far more cautious about lending against a leasehold interest. This guide explains what leasehold really means, how ground rent and lease reviews work, why leasehold sells cheaper but carries more risk, how it differs from cross-lease and unit title, and four worked New Zealand examples so you can read the fine print before you sign.

Calculate.co.nz is proud to be partnered with Premium Homes, a recognised leader in eco-friendly, sustainable, and energy-efficient homebuilding. With a dedicated team and award-winning experience, they create homes that prioritise health, comfort, and long-term performance. Their founders, Andrew and Kelly, set out to raise the standard of residential construction in New Zealand by combining practical building expertise with a clear commitment to doing things better for homeowners.

                Key Point: With leasehold you own the buildings but lease the land and pay ground rent to the landowner. Settled.govt.nz warns that ground rent can change and will usually increase, and that rising rent together with a shortening lease term can seriously affect your ability to sell later. The low purchase price reflects real risk, not a bargain, so understand the ground rent, the review terms and the lease length before you buy.
            

Freehold versus leasehold

Freehold, also called fee simple, is the most common form of ownership in New Zealand. You own the land and generally everything built on it, indefinitely. Leasehold splits that apart: someone else keeps the land, and you hold a time-limited right to occupy it and the buildings on it, in exchange for ground rent.

Feature	Freehold (fee simple)	Leasehold
The land	You own it, indefinitely	Someone else owns it, you lease it
Ongoing payment to a landowner	None	Ground rent, reviewed and usually rising
Land value growth	Accrues to you	Accrues to the landowner, not you
Purchase price	Higher	Lower, because you own less
Getting a mortgage	Straightforward	Harder, banks are cautious

💡 You own the house, not the ground it stands on

It helps to picture the building and the land as two separate things. On a freehold title you own both. On a leasehold title you own the building and improvements, but you are a long-term tenant of the land. That is why you keep paying ground rent for as long as you own the property, and why the value of what you hold depends heavily on how much rent you pay and how many years are left on the lease.

The four types of ownership in New Zealand

Leasehold is one of four ownership types you will see on New Zealand listings. Knowing where it sits helps you avoid confusing it with the others, which we cover in detail later.

Freehold (fee simple): you own the land and buildings outright
Leasehold: you own the buildings but lease the land and pay ground rent
Unit title: you own your unit plus a share of the freehold common property, with a body corporate
Cross lease: you share the freehold title with others and hold a long lease, usually 999 years, over your part for a nominal rent

💸 Ground rent, reviews and the lease term

Three things in the lease document decide whether a leasehold property is manageable or a money pit: the ground rent, how and how often it is reviewed, and how long the lease has to run. Read all three before you make an offer.

Ground rent

Ground rent is the amount you pay the landowner for the use of the land, and it is separate from your mortgage, your rates and, in an apartment, your body corporate levies. It is often set as a percentage of the land value, so as land values rise the rent tends to rise with them. Unlike your mortgage, ground rent does not reduce over time and never ends while you own a leasehold property, and it buys you no equity.

Ground-rent reviews can rise sharply

The lease sets out how often the ground rent is reviewed. Reviews might be every 7, 11 or 21 years. The longer the gap between reviews, the bigger the jump can be, because years of land-value growth are captured in a single step. Settled.govt.nz states plainly that ground rent can change and will usually increase. A rent that felt affordable when you bought can multiply at a review, and you have little power to stop it if the lease allows it.

⚠️ Reviews are infrequent but can be brutal

On some long-established leases, ground rent is reset to a percentage of the current land value every 21 years. When land values have surged over that period, the increase can be several times the old rent. Homes on Cornwall Park land in Auckland have seen documented review increases running into many times the previous rent. Always find out the review basis (for example, a percentage of current land value), the review interval, and the exact date of the next review, because buying just before a review can leave you facing a large rent rise almost immediately.

The lease term and what happens near expiry

Leases come in two broad shapes. Some are perpetually renewable, meaning they roll over indefinitely with periodic rent reviews, so the land is effectively yours to use forever as long as you keep paying rent. Others are fixed-term, running for a set number of years. With a fixed-term lease the number of years remaining matters enormously. As Settled.govt.nz notes, a shortening lease term, together with rising rent, can seriously affect your ability to sell your leasehold interest later.

At the end of a fixed-term lease, unless it is renewed, you generally must return the land and the buildings to the landowner in the condition the lease requires. In other words, the improvements you paid for can revert to the landowner. Long before that point the property becomes very hard to sell, because each new buyer inherits an even shorter lease.

💡 Perpetual is not the same as freehold

A perpetually renewable lease sounds reassuring, and it does remove the expiry problem, but you still pay ground rent forever and still own no land, so the rent-review risk remains front and centre. A fixed-term lease adds a second problem on top: a countdown that shrinks the value of what you own as it runs down. Check which type you are dealing with, and get your lawyer to read the lease in full.

📊 Cheaper but riskier, and easy to confuse

Leasehold sells cheaper for good reasons, and it is often muddled up with cross-lease and unit title, which are quite different. This section pulls the risks together and draws the distinctions clearly.

Why leasehold sells cheaper but carries more risk

No land equity: land value growth goes to the landowner, so you miss out on the part of property that usually appreciates most
Ongoing ground rent: a permanent cost that can rise at reviews and never builds equity
Harder to finance: banks lend cautiously against leasehold, often wanting a larger deposit or a shorter loan, and some will not lend at all on short leases
Harder to resell: a smaller pool of buyers, and each faces the same rent and lease-term risk you did
Rising costs near review dates: a review can lift your holding costs suddenly and sharply

⚠️ The low price is the risk, priced in

A leasehold property is cheaper than a comparable freehold because the market has already discounted it for the ground rent, the lack of land equity, the financing difficulty and the resale risk. The saving on the sticker price is not free money, it is compensation for costs and risks you take on. Weigh the whole picture, not just the headline price.

Leasehold is not cross lease or unit title

These three get confused constantly, partly because unit title apartments can sometimes sit on leasehold land. Here is how they actually differ.

Type	Do you own the land?	What you pay	Typical use
Leasehold	No, someone else owns it	Market ground rent to the landowner, reviewed and usually rising	Some Auckland CBD apartments, Cornwall Park homes
Cross lease	Yes, a share of the freehold with the other cross leaseholders	A nominal rent, usually for a 999-year lease, often not even collected	Two or more houses on one former section
Unit title	Yes, your unit plus a share of the freehold common property	Body corporate levies for shared upkeep, no ground rent (unless the land is separately leasehold)	Apartments, townhouses, multi-unit developments

💡 Watch for a leasehold unit title

Most apartments are unit titles on freehold land, where you pay body corporate levies but no ground rent. A minority sit on leasehold land, where you pay both body corporate levies and ground rent to a separate landowner. That combination carries all the leasehold risks on top of normal apartment costs, so confirm the underlying land tenure, not just that it is a unit title.

What to check before buying a leasehold

☐ The current ground rent, and how it compares with rates and levies
☐ The review basis, for example a percentage of current land value
☐ How often the rent is reviewed, and the exact date of the next review
☐ Whether the lease is perpetually renewable or fixed-term
☐ How many years remain if it is fixed-term
☐ What happens to your buildings at expiry
☐ Whether your bank will lend on it, and on what terms
☐ Who the landowner is and how reasonable past reviews have been
☐ A full review of the lease document by your own lawyer

🔢 Four worked New Zealand examples

These examples use illustrative prices, rents and interest rates to show how the numbers behave. Real leases vary widely, so treat them as a method rather than a quote, and always read the actual lease.

A CBD apartment facing a ground-rent review

Situation: Ben is looking at a leasehold apartment priced at $400,000. The ground rent is currently $18,000 a year, set at 5% of the apartment's share of the land value, and reviewed every 7 years. The next review is due soon, and the land has risen so that his share is now assessed at about $500,000.

What the review does to the rent:

Current ground rent: $18,000 a year

New rent at review: 5% × $500,000 = $25,000 a year

Increase: $25,000 − $18,000 = $7,000 a year, about $583 a month more

Ground rent alone rises to $25,000 a year, before mortgage, rates or body corporate levies

⚠️ Add the levies, then look again

This apartment is a unit title on leasehold land, so on top of the $25,000 ground rent Ben also pays body corporate levies, say $8,000 a year, taking his fixed holding cost to about $33,000 a year before his mortgage. Buying just before a review means inheriting the higher rent almost at once. Ben should confirm the review date and the new assessed land value before deciding what the apartment is really worth to him.

Freehold versus leasehold: the saving that disappears

Situation: Priya compares two similar apartments. The freehold one is $650,000. The leasehold one is $400,000, so the price gap is $250,000, which looks like a big saving. The leasehold apartment has ground rent of $20,000 a year.

How long the ground rent takes to eat the saving:

Upfront price gap: $650,000 − $400,000 = $250,000

Ground rent: $20,000 a year

Years to spend the saving in rent: $250,000 ÷ $20,000 = 12.5 years

After about 12.5 years the ground rent alone has consumed the entire upfront saving, and Priya still owns no land

💡 Compare total cost, not sticker price

The freehold buyer owns land that can appreciate, while the leasehold buyer pays rent that can rise and builds no land equity. Once you count ground rent over the years you plan to stay, and remember that reviews usually push it higher, the leasehold saving shrinks fast. Compare the total cost of ownership and the equity you will hold at the end, not just the day-one price.

A 21-year review: a documented sharp jump

Situation: Some Auckland leasehold homes sit on land where the ground rent resets to a percentage of the current land value only once every 21 years. On Cornwall Park land, one home's ground rent was documented rising from about $8,300 a year to about $73,750 a year at a scheduled 21-year review. This example uses those figures to show the scale.

The size of the jump:

Old ground rent: about $8,300 a year

New ground rent at review: about $73,750 a year

Increase: $73,750 − $8,300 = $65,450 a year, about $5,454 a month more

That is roughly 8.9 times the old rent, in a single step

⚠️ A long gap between reviews hides a big step

Infrequent reviews feel comfortable because the rent sits still for years, but they store up a large adjustment. When 21 years of land-value growth land in one review, the rent can multiply. Before buying on a long-review lease, find out when the last review was, when the next one falls, and what the land is worth now, so you can estimate the next step rather than be shocked by it.

A short lease: hard to finance, hard to resell

Situation: Marama wants to buy a leasehold townhouse for $350,000. It is on a fixed-term lease with only 8 years left to run. Her bank is willing to lend $300,000, but only if the loan is repaid within the remaining lease, so over 8 years rather than a normal 25. Assume an illustrative 6.5% interest rate.

What the squeezed loan term does to repayments:

$300,000 over 25 years at 6.5%: about $2,026 a month

$300,000 over 8 years at 6.5%: about $4,016 a month

Squeezing the loan into 8 years nearly doubles the monthly repayment

💡 The resale problem is the same problem, later

When Marama comes to sell, the next buyer faces an even shorter lease, perhaps only 3 or 4 years, and an even tighter loan, so the pool of buyers shrinks and the price falls. Short-term leasehold can suit a cash buyer with a clear plan, but for most people the financing and resale difficulty makes it very risky. If a lease is short, treat a low price as a warning, not a bargain, and get specific lending confirmation before you commit.

Related tools and guides

📚 Sources

Verified July 2026 against: Settled.govt.nz, understanding the types of ownership (freehold, leasehold, unit title and cross lease, ground rent, rent reviews and lease expiry), including the warning that ground rent can change and usually increases and that rising rent and a shortening term affect your ability to sell; and Cornwall Park lease information and reporting on documented 21-year ground-rent reviews on Cornwall Park land. Prices, rents and interest rates are illustrative, and the Cornwall Park figures are drawn from reported reviews to show scale. This guide is general information, not legal advice.

🎯 Test Your Knowledge

Complete this 10-question quiz to check your understanding of leasehold property

1. What do you actually own when you buy a leasehold property?

Both the land and the buildings, outright

The buildings and improvements, but you lease the land from the landowner

The land only, not the buildings

A share of a body corporate, but no building

2. What is ground rent?

The interest you pay on your mortgage

The rent a leaseholder pays to the landowner for the use of the land

The council rates on the property

A one-off fee paid only at settlement

3. According to Settled.govt.nz, what usually happens to ground rent over time?

It is fixed for the life of the lease

It can change and will usually increase, often sharply at review dates

It reduces as you pay down your mortgage

It is capped at the rate of inflation by law

4. Why does leasehold usually sell for less than a comparable freehold property?

Leasehold buildings are always older

You do not own the land, so you gain no land equity and carry ongoing ground rent and lease risk

Leasehold has no council rates

The government subsidises the price

5. How does leasehold differ from a cross lease?

They are exactly the same thing

Cross leaseholders share the freehold and pay only a nominal rent, usually for 999 years, while a leasehold owner pays market ground rent to a separate landowner

Cross lease means you own no buildings at all

Leasehold always lasts 999 years

6. How does leasehold differ from a unit title?

Unit title owners never pay any levies

A unit title owner owns their unit and a share of the freehold common property, whereas a leasehold owner does not own the land at all

Unit title means you own the land but not your unit

Leasehold and unit title cannot exist together

7. What tends to happen to your leasehold interest as the lease term shortens and ground rent rises?

It becomes worth more and easier to sell

It becomes harder to sell and harder to finance

Nothing changes until the very last day

The bank automatically converts it to freehold

8. Where is residential leasehold relatively common in New Zealand?

Only in rural Southland

Some Auckland CBD apartments and the homes on Cornwall Park land

Only in brand-new subdivisions

Nowhere, it no longer exists in New Zealand

9. What should you check before buying a leasehold property?

Only the asking price

The ground rent, how and how often it is reviewed, the review basis, and the remaining lease term

Whether the carpet is new

Nothing, leasehold is standardised by law

10. What generally happens at the end of a fixed-term lease if it is not renewed?

You automatically become the freehold owner

You must return the land and buildings to the landowner in the condition the lease requires

The landowner must pay you the market value of the land

The lease simply carries on rent-free

🧮 Try the Mortgage Calculator

If you've found a bug, or would like to contact us, or learn more about James Graham and Calculate.co.nz.

Calculate.co.nz is partnered with Interest.co.nz for New Zealand's highest quality calculators and financial analysis.

Calculate.co.nz is the sister site of CalculatorHub.com, the world's largest calculator website by tool count.

All calculators and tools are provided for educational and indicative purposes only and do not constitute financial advice.

Calculate.co.nz is proudly part of the Realtor.co.nz group, New Zealand's leading property transaction literacy platform, helping Kiwis understand the home buying and selling process from start to finish. Whether you're a first home buyer navigating your first property purchase, an investor evaluating your next acquisition, or a homeowner planning to sell, Realtor.co.nz provides clear, independent, and trustworthy guidance on every step of the New Zealand property transaction journey.

Calculate.co.nz is also partnered with Health Based Building and Premium Homes to promote informed choices that lead to better long-term outcomes for Kiwi households.

Calculate.co.nz is hosted in Auckland by SiteHost New Zealand.

All content on this website, including calculators, tools, source code, and design, is protected under the Copyright Act 1994 (New Zealand). No part of this site may be reproduced, copied, distributed, stored, or used in any form without prior written permission from the owner.

About & trust: Why Calculate is NZ's most comprehensive · By the Numbers · How we compare · Editorial standards · How we keep data current · NZ finance glossary · Research & data · Financial literacy NZ · About · Privacy policy · Terms of use

Reviewed and maintained. Last reviewed 2026-08-10 and checked on a twice-monthly cycle against IRD, RBNZ and Stats NZ. How we keep data current.