Leaseholds: Overview, definition, and example
What is leaseholds?
Leaseholds refer to the rights you get when you lease property—like office space, a storefront, or land—from someone else for a specific period of time. You don’t own the property outright, but you do have the legal right to use it under the terms of the lease.
In simple terms, a leasehold is your right to occupy and use someone else's property, usually in exchange for rent.
Why is leaseholds important?
Leaseholds are a common way for businesses to operate without having to buy property. Whether you're leasing an office, retail unit, or warehouse, your leasehold gives you certain rights—like using the space, making improvements (with permission), or even subleasing it.
From a legal and financial perspective, leaseholds can be considered business assets, especially if the lease is long-term or includes favorable terms. They can affect your business’s value, your ability to borrow money, or even sell your business.
Understanding your leasehold rights and obligations helps you make smart decisions and avoid costly disputes with landlords.
Understanding leaseholds through an example
Let’s say your coffee shop rents a corner unit in a busy downtown area. You sign a 5-year lease. That lease gives you a leasehold interest in the property—you don’t own the building, but you do have the legal right to operate your business there for 5 years.
You can even list the leasehold as a business asset when applying for a loan, especially if the lease terms are below market rate or if you’ve built up goodwill in that location.
At the end of the lease, your rights to the space end—unless you renew or extend it.
An example of a leaseholds clause
Here’s how leaseholds might be mentioned in a commercial agreement or asset sale:
“The Seller shall transfer all rights, title, and interest in and to the leaseholds listed in Schedule A, including any improvements, options to renew, or sublease rights associated with such properties.”
Conclusion
Leaseholds give your business the legal right to use and occupy space without buying it outright. They’re a flexible and cost-effective way to operate, especially for growing companies that don’t want to be tied down by property ownership.
Understanding your leasehold—and how it fits into your contracts, operations, or sale agreements—can help you protect your business, manage your space, and plan ahead with confidence.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.