Leasehold land in home buying: what the buyer needs to check

An apartment on leasehold land may seem like a good deal at first glance. The price is low, the location is fine, the housing company appears functional. But then, after the purchase, it starts to become clear what questions were left unasked. The Central Association of Real Estate Agencies (KVKL) has raised precisely this issue: buyers do not always receive sufficient information about the true costs and future financial obligations of leasehold properties. This is not a minor detail. It can mean thousands of euros in additional annual expenses or, at worst, a situation you are not prepared for at all.

What does leasehold land actually mean?

When an apartment is located on leasehold land, the housing company does not own the land beneath its building. It rents it from someone else – most often the municipality, parish, or a private landowner. The housing company pays ground rent for this, which is passed on to shareholders in their maintenance fees.

This is not automatically a problem. In many cities, a large portion of the housing stock is located on leasehold land, and daily life proceeds normally. Problems arise when the terms are unfavorable, the contract is nearing expiration, or information about these matters does not reach the buyer.

In new builds, you will also encounter a special form, optional leasehold land, which is a chapter of its own and is explained in more detail below. Its terms conceal one of the most common price surprises in property transactions.

Ground rent level and how it can change

The first thing to find out: how much ground rent is currently being paid, and on what basis can it increase?

Ground rent is usually tied to some index, or it can be revised according to contract terms when the contract period ends. If the contract was signed decades ago at a low rent level, renewal can mean a significant increase. This increase is reflected directly in your maintenance fees.

Ask the property manager for the current ground rent in euros per square meter or euros per year. Then calculate how much it is in relation to your share’s floor area. Compare it to the maintenance fees of a comparable freehold property in the same area.

Remaining duration of the contract – this determines a lot

A ground lease contract always has an expiration date. It may be five years away or thirty years away. This makes a big difference.

The shorter the time remaining on the contract, the greater the uncertainty from the buyer’s perspective. When the contract period ends, the landowner can renegotiate the terms from their own starting point. The rent can increase significantly. In some cases, continuation is not a given.

So ask: when does the current contract expire? Has anything been agreed about continuation? Does the housing company have a right of first refusal or redemption right to the land?

Redemption right – does it exist and what would it cost?

In some contracts, the housing company has the right to redeem the land for itself at the end of the contract period or under certain conditions during the contract period. This is a good thing from the buyer’s perspective, but it does not mean that redemption is free or even affordable.

The redemption price is usually based on the land’s fair market value at the time of redemption. In growth centers, this can mean a very large sum for the housing company, which is divided among shareholders in the form of a capital charge or financed by a loan. Your share could be tens of thousands of euros.

If a redemption right exists, find out its terms. If it does not exist, find out what options the housing company has when the contract period ends.

Optional leasehold land – when the true price hides behind the selling price

Optional leasehold land refers to an arrangement in which the apartment shareholder can choose whether to redeem their apartment-specific share of the land or pay monthly ground rent to the housing company. The redemption right in this structure belongs to the shareholder, not just the housing company. The arrangement is common in new builds, and that is precisely why it is worth understanding before making a purchase decision.

More important than the purchase price is understanding what the choice means in practice. The Finnish Competition and Consumer Authority (KKV) points out that the redemption price is not fixed and its development may be impossible to predict, as the lease contract’s escalation clauses can raise the price. In addition, rent already paid for the land does not reduce the redemption price. The redeemed share transfers to the housing company’s ownership, so the shareholder does not become the landowner. More information can be found on KKV’s website.

Why the selling price does not tell the whole truth

The biggest pitfall is that the property appears remarkably affordable in the listing. The selling price and stated maintenance fee may cover only part of the actual costs. On top of the selling price come the land share, possible financing charge, and ground rent. If the buyer estimates their monthly costs based solely on the maintenance fee, the overall picture is severely incomplete.

A practical example illustrates this well. In one new build on optional leasehold land, the selling price was exceptionally low, and the buyer’s estimate of the maintenance fee included only the maintenance fee. The buyer stated over the phone that they wanted the property even without having seen it. When the property’s debt-free price including the land share was disclosed, it turned out to be approximately triple the selling price. The total maintenance fee, when the financing charge and ground rent were included, was about quadruple what was initially assumed. The buyer withdrew from the deal fairly quickly.

In this case, nothing was concealed. The figures existed, but you had to know to ask for them and add them up. This is exactly where many buyers get caught: the first number is attractive, and it does not even occur to them to ask for the second number.

Three numbers you must always ask for

• Selling price – what you pay for the shares as such
• Debt-free price – the property’s total price, which includes the share of the company’s debts and the land share
• Total maintenance fee – maintenance fee, financing charge, and ground rent combined, in euros per month

When these three numbers are on the table, the question “how much does this actually cost per month and what do I pay in total?” gets an answer. Before that, a purchase decision should not be made.

Your checklist before making a purchase decision

• Is the land optional leasehold land – if so, what is the estimated redemption price and under what conditions can the price increase
• Selling price, debt-free price, and total maintenance fee – all three in writing before you make an offer
• Current ground rent level in euros per year and how it is divided among your shares
• Contract expiration date and information on whether anything has been negotiated or agreed about continuation
• Escalation mechanism – which index the rent is tied to and when the next review is
• Redemption right – does it exist, who has it (the housing company or the shareholder), under what conditions, and what would the estimated redemption price be
• Property manager’s certificate – KVKL has noted that property manager’s certificates have gaps in their information content and not everything essential may be found there automatically
• Articles of association – check what they say about the leasehold land and related responsibilities

What all this means in the long term

The total costs of a leasehold property over a 10-20 year perspective can differ significantly from what the purchase price and current maintenance fee alone suggest. This does not mean that a leasehold property cannot be a good purchase. It just means that the calculation must be honest.

KVKL has underlined that buyers do not always receive sufficient information about the property’s true costs and future financial obligations. This is a structural problem, not an isolated error. The buyer’s task is to fill the information gap themselves by asking the right questions before the purchase agreement is signed.

If you do not get clear answers about ground rent, contract duration, and redemption rights, consider it a red flag. It is not unreasonable to demand this information in writing before completing the transaction.