When it comes to real estate, the terms “leasehold” and “freehold” refer to two distinct forms of property ownership. Understanding the difference between these two can have significant implications for both homeowners and investors. In this article, we’ll delve into the key distinctions between leasehold and freehold properties to help you make informed decisions in the world of real estate.
Leasehold Properties:
According to Indonesian law and regulation about property, leasehold is mainly for Foreigners that want to own a property in Bali but with time restriction. Here are the things you need to understand about Leasehold properties in Bali.
- Ownership Period: In a leasehold property, the owner has the right to use and occupy the property for a specified period, which is determined by a lease agreement. Typically, these leases can last anywhere from 20 to 99 years, and in some cases, even longer.
- Limited Ownership: The leaseholder does not own the land but rather a contractual right to use the property. Ownership reverts to the freeholder (landowner) at the end of the lease.
- Renewal and Extension: In some cases, leasehold agreements allow for renewal or extension of the lease, but this often involves additional costs and negotiations.
- Responsibilities: Leaseholders may have certain responsibilities, such as paying annual lease fees or ground rent to the freeholder, as well as maintenance and service charges, depending on the terms of the lease.
- Transfer and Sale: Leasehold properties can be bought and sold, but the remaining lease term can affect the property’s market value. Shorter lease terms can deter potential buyers.
- Renovation and Alterations: Depending on the lease agreement, leaseholders may require permission from the freeholder to make significant alterations or renovations to the property.
Freehold Properties:
Freehold is basically for locals (Indonesian). They can own the property for a lifetime. For foreginer, you can with through a local Indonesian legal entity, such as a PT PMA (foreign investment company). Another thing we’ve heard is foreginer must have a Local/Indonesian partner they can trust. Here are the things you need to know about freehold properties in Bali.
- Ownership Period: Freehold properties grant the owner absolute and indefinite ownership rights. The property and the land it stands on are owned outright, with no time limit.
- Unlimited Ownership: Freehold owners have complete control over the property, including the land it sits on. They can pass it on to heirs or sell it without restrictions.
- Responsibilities: While freehold owners enjoy greater freedom, they are solely responsible for all aspects of property maintenance, land ownership, and associated costs.
- Market Value: Freehold properties often have a higher market value than leasehold properties because of the long-term ownership rights they offer.
- Renovation and Alterations: Freehold owners have the freedom to make alterations or renovations to their property without seeking permission, as long as they comply with local regulations.
- Transfer and Sale: Selling a freehold property is straightforward, and the owner has the freedom to do so without restrictions related to lease terms.
Conclusion:
In summary, the fundamental difference between leasehold and freehold properties lies in the ownership rights and the duration of those rights. Leasehold properties offer a limited, time-bound right to use the property, while freehold properties provide indefinite and absolute ownership. Your choice between the two depends on your financial circumstances, long-term objectives, and the local real estate market conditions. Both forms of ownership have their pros and cons, and it’s essential to carefully consider your options and always talk to Bali Real Estate Agency before making a real estate investment.
