What is a leasehold property?

Most Australians who buy a home buy freehold, and never give the word a second thought. But every so often a contract lands on our desk for a waterfront cottage, a marina berth, a holiday shack on a reserve or a rural block out west, and the title search shows something different: the buyer is not acquiring the land at all, but the remaining years of a lease from the Crown.

This article explains what leasehold means, where you are most likely to meet it today, whether it is worth less than freehold, what happens when the term runs out, and what borrowers and their lenders need to watch for.

Freehold and leasehold: the basic distinction

The difference comes down to how long your interest lasts and who sits above you. A freehold owner holds the land indefinitely and can sell it, leave it in a will or mortgage it without anyone’s permission. A leaseholder holds the land only for a fixed term, under conditions set by a landlord, and when the term ends the land goes back to that landlord.

The vocabulary is centuries old. After 1066, English law treated the Crown as the ultimate owner of all land, and everyone else held land “of” the Crown under some form of tenure. The most complete interest became known as the fee simple, an estate that could be inherited and passed on forever, which is what we now call freehold. A lease, or term of years, was a lesser interest carved out of someone else’s estate for a set period.

Australia inherited that framework. The Crown acquired the radical title to the land, then granted it out, either outright in fee simple or by lease. In New South Wales most private land was eventually granted in fee simple and now sits on the Torrens register as ordinary freehold title. The Crown kept the rest, and much of what it kept is the most sensitive land in the State: foreshores, the beds of harbours and rivers, reserves, and the Western Division.

Where you will meet leasehold today

In NSW, leasehold usually turns up on the edges: where land meets water, on public reserves, and out west. A buyer can easily be purchasing a freehold house whose jetty, boatshed, pontoon or reclaimed garden is held on a separate lease.

Crown leases under the Crown Land Management Act 2016. Crown Lands leases land for exclusive uses such as boatsheds, marinas, caravan parks, tourism and commercial operations. Under its leasing policy, leases are generally granted for up to 25 years including options, at market rent, and anything longer needs a more detailed business case.

Transport for NSW maritime leases (formerly RMS). Transport for NSW owns the bed of Sydney Harbour, Botany Bay, Newcastle Harbour and Port Kembla Harbour and manages over 2,000 maritime property agreements. For private homes, its domestic waterfront guide (June 2025) offers unregistered leases of 3 or 20 years, or registered leases of 20 years. Rent is the leased area multiplied by an annually updated precinct rate set under an IPART formula. Elsewhere on the coast and on rivers, the equivalent is a Crown Lands domestic waterfront licence.

Western Lands leases. Most of the Western Division is held under Western Lands leases, most of which run in perpetuity, so they behave much like freehold with an annual rent.

The ACT. Across the border, almost every home sits on a Crown lease, usually for 99 years. This is the classic “99-year lease” most people have in mind.

Is freehold worth more than a 99-year Crown lease?

All else being equal, yes: freehold is the larger interest, so it is worth at least as much and usually more. How much more depends far less on the label “leasehold” than on four practical questions.

1. How many years are left? A lease is a wasting asset. A lease with 90 years to run behaves almost like freehold in the market, because few buyers look that far ahead. A lease with 8 years left is a very different proposition, and its value falls faster as expiry gets closer.

2. How certain is renewal? This is the single biggest driver. In the ACT, a further residential lease must be granted unless the land is needed for a public purpose, and it costs only an administrative fee, so Canberra homes trade at what are effectively freehold values. In NSW there is generally no right to renew a Crown lease: a new lease may go to a competitive process, and the Crown can decide it wants the land back. A buyer, and their valuer, will discount heavily for that uncertainty.

3. What does it cost to hold? Freehold owners pay rates. Crown and maritime lessees also pay rent, which for Crown leases is market-based and for domestic waterfront leases is set by formula and reviewed every year. The capitalised cost of that rent comes off the value.

4. What happens at the end? Many Crown and maritime leases require the lessee to remove structures and make good the site at their own expense. A boatshed you must demolish at expiry is a liability, not an asset, in the final years.

A useful way to think about a lease with a right to buy the freehold: its value is roughly the freehold value, less the purchase price the Crown will charge, less the costs of converting. For example (illustrative figures only), if a freehold lot would sell for $1.5 million and the Crown would convert it for an unimproved value of $400,000 plus about $30,000 in duty and costs, a rational buyer would pay no more than about $1.07 million for the leasehold.

For a waterfront home where only the jetty or boatshed is leased, the question is narrower. The freehold house carries most of the value; the lease adds a premium for water access that depends on its remaining term, its rent and whether the next owner can take an assignment.

Do leases have to be extended, and how?

No one is forced to extend a lease, but doing nothing has a consequence: when the term ends, the land goes back to the Crown, and the lessee may be required to clear it. If you want to keep the property, you have three broad routes, depending on the tenure.

Apply for a new lease. NSW Crown leases do not renew automatically. The lessee applies for a new lease, and Crown Lands assesses it against its policies, native title and any Aboriginal land claims. Crown Lands can run a competitive process rather than deal only with the sitting tenant, and the new rent will be market rent. For Transport for NSW domestic waterfront leases, a 20-year registered lease needs a development application and a survey of the occupied area, with all costs paid by the lessee.

Buy the freehold. Some Crown leaseholders can purchase their lease. The price is generally the unimproved land value, or the unimproved market value set by the Minister. It can be paid within 28 days, or by instalments over up to 20 years (minimum $2,500 a year) under an “incomplete purchase”. Stamp duty, GST, survey, valuation and NSW Land Registry Services fees are on top. Note that rights to buy older term leases were time-limited after the 2018 reforms and have now lapsed, so check what rights a particular lease actually carries.

Extend the term (Western Lands and the ACT). Western Lands term leases can be extended up to a maximum of 40 years, or converted to a perpetual lease. ACT lessees can apply for a further 99-year Crown lease at any time during the term.

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These are application fees only, from the Crown Lands fee schedule. The real cost of keeping or converting a lease is usually the purchase price or new market rent, plus survey, valuation, planning and legal costs, which can dwarf the application fee.

What borrowers and lenders need to watch

A lender’s security is only as good as the interest it sits over, and a lease can end or be terminated. Expect a lender to look harder at leasehold, and build that time into your finance clause.

Consent to mortgage. Depending on the lease conditions and notations on the title, you may need the Minister’s consent to mortgage a Crown lease ($365 in 2026–27). Crown Lands can refuse if the mortgage is not in the Crown’s interest, and it wants a copy of the proposed mortgage and evidence that any existing mortgagee agrees. Build this into your settlement timetable.

Remaining term against loan term. Lenders want the lease to outlast the loan, usually by a comfortable margin, so that the property can still be sold if they need to enforce. Policies differ between lenders and change often, so ask your broker or lender for their current requirement before you sign. A short unexpired term can mean a lower loan-to-value ratio, a shorter loan, or no loan at all.

Registered or unregistered. A registered lease appears on the Torrens register and can carry a registered mortgage. Many domestic waterfront leases are unregistered, and may prohibit caveats, so a lender will usually value the freehold home and give little or no value to the jetty or boatshed.

Termination risk. Unpaid rent, unapproved works or failure to maintain can lead to termination, which wipes out the lender’s security. Mortgagees should check whether the lease gives them notice of default and a chance to remedy it.

Converting to freehold. If you buy the freehold, the existing mortgage over the lease must be dealt with and a new mortgage taken over the freehold title. Under an incomplete purchase, the Crown is still owed money until the final instalment, so talk to your lender before choosing that option.

Before you buy: a checklist

• Confirm exactly what is freehold and what is leased or licensed, including jetties, boatsheds, pontoons, seawalls and reclaimed land.
• Get a copy of every lease and licence, and check the expiry date, rent, review dates, permitted use and any removal or make-good clause.
• Check whether the lease can be assigned to you, and whether Crown Lands or Transport for NSW consent is needed.
• Ask whether the lease carries any right to purchase the freehold, and on what terms.
• Order a Crown Lands conveyancing search and ask the vendor for confirmation that rent is paid and there are no outstanding notices.
• Speak to your lender early about the unexpired term and whether they will lend on it.
• Ask your valuer to value the property on its actual tenure, not as if it were freehold.

How we can help

Leasehold property is not a reason to walk away, but it is a reason to read the fine print before you exchange. Dott & Crossitt can review the contract and the lease documents, order the right searches, explain your renewal or purchase options, and liaise with Crown Lands, Transport for NSW and your lender. Get in touch or book a contract review before you sign.

This article is general information only and is not legal or financial advice. Fees and policies were current as at November 2026 and change regularly; always check your own circumstances with a qualified adviser.

Sources

• Crown Lands – Fees and applications overview (2026–27)
• Crown Lands – Leasing of Crown Land policy IND-O-253
• Crown Lands – Purchasing your Crown land lease to obtain freehold title (fact sheet)
• Crown Lands – Mortgage your lease
• Crown Lands – Extension of term of a Western Lands lease (fact sheet)
• Transport for NSW – Maritime Property Guide: Establishing Domestic Waterfront Leases and Licences (June 2025)
• Transport for NSW – Maritime property policies and information guides
• ACT Planning – Crown leases

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