May 2024 | Buy and Sell Properties Online New York May 2024 | Buy and Sell Properties Online New York

Month: May 2024 Posts

Land Ownership: Understanding Freehold Ownership And Leasehold Ownership

Land ownership is a considerable form of property ownership, navigating the intricacies of which is essential for anyone looking to own or invest in real estate.

Whether you want to build your dream home on a piece of land or simply want to make a real estate investment, your unique needs and requirements play a great role in deciding what type of land ownership is suitable for you. Here is where understanding the types of land ownership becomes important.

Well, there are usually two types of land ownership options: freehold and leasehold. Both these types of ownership have their own pros and cons.

Let’s take a deep dive to understand both freehold and leasehold ownerships more closely so that you choose to have the best-suited land ownership for you.

What Is Freehold Ownership?

Having freehold ownership means you are the sole owner of the land and any buildings on it for all time. So, a freehold property is any estate that is “free from hold” by any entity other than the owner.

As long as the usage of the land complies with local regulations, you have the right to use, modify, sell, and transfer the property without any restrictions. The right to ownership is inherited and is transferable to future generations.

Generally, undeveloped land parcels and many single-family houses are held as freehold properties, granting owners complete control over their real estate holdings.

What Is Leasehold Ownership?

Subject to the terms and conditions of a lease agreement, purchasing the right to use and occupy the land and any structures on it for a certain period is known as leasehold ownership. The lessor or landlord regains ownership of the property from the lessee or tenant after this period.

As payment for using the property, tenants are usually obliged to pay ground rent to the landlord. Ground rent is a fixed amount that is outlined in the lease agreement and is often paid annually or semi-annually.

Due to the scarcity of land and high property values, leasehold ownership is common in metropolitan areas and developments.

Freehold Ownership vs. Leasehold Ownership

To understand whether freehold or leasehold ownership is better for you, you should consider the below key comparable factors and decide which type of land ownership best suits your needs.

  1. Ownership Rights
    As a freeholder, you get the absolute ownership rights of the property. Since you are the property’s sole owner, you have total authority over how it is used, modified, and disposed of. Leasehold ownership grants the right to occupy and use the property for a certain period which is mentioned in the lease agreement.
  2. Tenure
    Under freehold ownership, the owner has a perpetual and constant right to the property. Land Ownership under a lease is temporary and for a specified period mentioned in the lease agreement. Unless the lease is renewed or renegotiated, ownership of the property reverts to the lessor after the end of the lease term.
  3. Cost
    Since you are just buying the right to occupy the property for a certain period, leasehold properties are usually less expensive to buy than freehold properties. Nonetheless, it’s crucial to account for the extra expenses associated with leasehold ownership, such as ground rent and maintenance fees.
  4. Sale And Transfer
    Freeholders can sell, transfer, or lease the property independently. While subject to the lessor’s approval and terms, the lessee has limited rights to transfer leasehold interests.
  5. Decision-making
    Freeholders have the exclusive decision-making authority over the property. Leaseholders are required to adhere to lease terms and guidelines when it comes to decision-making.
  6. Usage Restrictions
    A freeholder has complete freedom to use the property as desired. However, there could be certain restrictions under local regulations. For example, any construction or modification to the property must go by the rules established by the municipality in which the property is situated. In leasehold ownership, the property is still owned by the landlord, who has the authority to impose usage restrictions. Depending on the conditions of the lease agreement, tenants may be restricted from subletting, modifying, or using it for a specific purpose.
  7. Resale Value
    Due to the owner’s total control over the property and the land it is situated on, freehold ownership usually carries a higher resale value than leasehold ownership.

Pros And Cons

Below are some pros and cons of having freehold ownership and leasehold ownership. Have a look!

Pros Of Freehold Ownership

  • Absolute ownership
  • No ground rent
  • Freedom of usage
  • Complete control
  • Potential for capital appreciation

Cons Of Freehold Ownership

  • Higher upfront cost
  • Responsibility for maintenance
  • Property tax liabilities

Pros Of Leasehold Ownership

  • Lower upfront cost
  • Lower maintenance cost
  • Lease extension
  • Access to amenities and facilities

Cons Of Leasehold Ownership

  • Time-limited ownership rights
  • Limited control
  • Restricted usage
  • Ground rent and service charges
  • Mortgage complexities and higher interest rates

Frequently Asked Questions of Land Ownership

  1. Which kind of property is better – freehold or leasehold?
    Freehold properties are appropriate for residential use, investment, and obtaining bank loans. Leasehold properties, on the other hand, are preferable for low maintenance requirements and economical commercial use.
  2. Is investing in freehold real estate safer?
    Given that a freehold property has been registered and is anticipated to appreciate in value, it is regarded as a safer investment.
  3. Who actually owns leasehold property?
    The lessor of the lease agreement holds actual ownership of the leasehold property.

Final Verdict

Your unique situation and preferences will determine which type of land ownership – freehold or leasehold – you should choose.

Freehold ownership is a well-liked option for people looking to make long-term investments because it provides total autonomy and perpetual ownership. On the contrary, leasehold ownership is a more feasible choice for urban residents and commercial enterprises since it offers more reasonably priced access to properties with shorter lease durations.

However, before choosing, it’s essential to carefully understand the advantages and disadvantages of each type of land ownership. You can consult with property experts like Elites Properties, where we can help you make an informed decision. Contact us here.

Selling a house is a significant milestone yet a daunting task. Right from preparing your house for selling to finding buyers, negotiating, and closing the deal, is all a complex journey. Further, if you think that once you sign the sales contract you are done with all the responsibilities, you might be mistaken.

Selling a house in a state like New York comes with certain responsibilities. But exactly when and how long are you liable for any issues arising after closing?

Let’s find out, as understanding your liability after selling a house is crucial to avoiding legal disputes and protecting your interests.

When Is A Seller Held Liable After Selling A House?

Being a homeowner entails routine maintenance and repairs. After closing, new homeowners (buyers) often discover defects in the property, but your (seller’s) liability for any issues that existed before is limited.

However, it is your, your representative’s, and your inspector’s responsibility to disclose any known property defects as well as important information that can influence the property’s appeal.

Therefore, if you conceal material facts like the need for repairs or knowingly give false statements or make omissions, it could be considered fraud on your behalf and you could be held partially or fully responsible for the problems like repairs after closing.

According to the law, to make the seller liable for issues after the closing, the buyer must be able to prove that the seller breached the sales contract or any repair warranty, failed to disclose as required by state law, was fraudulent or negligent in disclosing information, or willfully misrepresented the state of the property.

When Is A Seller Not Held Liable After Selling A House?

If it is proved that you disclosed to the buyer all known defects or crucial information and did not do anything to prevent the buyer from finding any defects in the property, you are unlikely to be held accountable for any property issues after the closing.

Besides, rather than the seller, the real estate agent or the inspector can be held responsible for their failure to disclose if the seller was unaware of the defects but they were.

For instance, a real estate agent may be charged with fraud and deception if they conspire with a home inspector to hide damages to protect a deal from falling through. The seller can not be held accountable in this scenario.

That is why buyers need to do thorough property analysis and inspections before closing.

Requirements Under The New York Property Law

Regarding a home seller’s liability after a sale, different states have different laws and regulations.

Early on in the history of property law, New York adhered to the traditional principle known as “caveat emptor,” or “let the buyer beware“. This meant that sellers would not be held liable if they disclosed nothing about their property defects.

Later, New York courts implemented measures to safeguard buyers by establishing exceptions. For instance, a seller who possesses a special relationship of trust with the buyer, like that of trustee-beneficiary, guardian-ward, agent-principal, or attorney-client, could be held responsible for concealed property defects.

Furthermore, the courts declared that sellers can be held accountable to the buyers for any damages if they actively concealed defects. ‘Active concealment’ refers to a situation in which the seller obstructed the buyer’s attempts to inspect the property and knew about any damage but chose not to disclose it.

Property Condition Disclosure Act (PCDA)

The Property Condition Disclosure Act (PCDA) is the disclosure law in New York for property sales. Under this act, the seller is required to make certain disclosures about the property by giving the buyer a disclosure statement before the sales contract is signed.

Until now, the seller had the option to pay a credit of $500 towards the purchase price to the buyer at the closing if unable to deliver the disclosure statement. However, as per the latest amendment in the act, PCDA will no longer allow a seller of residential real estate to give the buyer a $500 credit instead of the disclosure statement, effective as of March 20, 2024.

Is The Seller Held Liable After Selling A House In Case Of As-in Clause?

An ‘as-in’ clause in a sales contract simply indicates that the house is being sold in its existing condition and the buyer accepts it ‘as-is’. This also means that you (the seller) need not need to fix any property defects disclosed or otherwise discovered by the buyer before the closing.

That’s why the buyer is still responsible to conduct an inspection and asses any property defects or find issues to make an informed decision.

If the buyer finds some defects in the property yet buys it anyway, cannot hold the seller liable after closing. However, despite the as-in clause, sellers can be held liable for fraudulent misrepresentation if they have sold the property without disclosing any known defects, or their inspections didn’t reveal the problem.

Statute Of Limitations In New York For Real Estate Transactions

If the buyer holds you responsible for any property repairs or other issues after closing, they can file a lawsuit but within a limited amount of time. This window of time is the ‘statute of limitations’.

Depending on the type of case and claim, the statute of limitations in New York State for real estate transactions typically ranges from one year to six years or even 10 years in some cases.

For example, in case of fraud or breach of contract in the sale of property, the statute of limitations is six years from the date of the fraud or from the date the contract was broken respectively.

The Final Say

By being transparent, making precise agreements, and getting expert advice, you can protect yourself from problems that may arise after the sale. You can contact our experts at Elite Properties today if you’re planning to have a smooth home-selling journey.

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