Leasehold Property: What You're Actually Buying

A soldier at Fort Huachuca came to me a few years back, excited about a commercial property in Sierra Vista. Good price, good location. Then I looked closer at the title. The land underneath the building wasn't included — the seller only owned the right to use that land for another 22 years. That's a leasehold interest, and it changed everything about that deal.

Let me break this down so it makes sense before you find yourself in a similar spot.

What Leasehold Actually Means

When most people buy real estate, they're buying what's called fee simple ownership — the land, the building, all of it, forever. You own it outright.

A leasehold is different. With a leasehold interest, you have the right to use a piece of property for a set period of time, under a lease agreement with the actual landowner. When that lease runs out, the land — and sometimes whatever you built on it — goes back to the landowner.

Think of it this way: fee simple is owning the whole pizza. A leasehold is renting a slice for a very long time.

Two Everyday Examples

Ground leases on commercial property. This is the most common situation I see locally. A business owner buys a building in Bisbee or Douglas, but the land underneath is still owned by someone else — a family trust, a municipality, a private investor. The business owner pays ground rent, sometimes monthly, sometimes annually. They control the property and can often sell their leasehold interest, but they never truly own the dirt.

Long-term residential leaseholds. Less common in Cochise County, but they exist. Some resort communities and retirement developments in Arizona are built on leased land. You buy the house, but you're paying a land lease fee every month on top of everything else. I've seen buyers get blindsided by this when they didn't read the fine print.

Why This Matters to You as a Buyer

Here's what changes when you're buying a leasehold instead of fee simple:

• Financing gets harder. Many lenders won't touch a leasehold property, or they require the lease to extend a certain number of years beyond the loan term. A 30-year mortgage on a property with 25 years left on the ground lease? Good luck.
• Resale value is unpredictable. As the lease term shrinks, so can your property's value. Buyers get nervous as the clock ticks down.
• You may owe rent to the landowner. Ground lease payments don't disappear when you buy the building. You're taking that obligation on.
• Lease terms vary wildly. Some ground leases run 99 years with renewal options. Some run shorter with ugly escalation clauses baked in.

The Mistake I See Most Often

Buyers assume that if they're getting a deed, they own everything. Not true. A deed can convey a leasehold interest just as easily as fee simple ownership. The deed tells you what you're getting — but you have to read it, and so does your agent.

Always ask: Am I buying the land too, or just the right to use it?

If you're working with a REALTOR® who doesn't flag this distinction before you make an offer, that's a problem.

A Word for Military Families

If you're PCS'ing out of Fort Huachuca and buying something quickly — I get it, the timeline is brutal. But leasehold properties can be especially tricky if you plan to rent the place out or sell in a few years. The shorter the remaining lease term, the harder it is to exit cleanly. Don't skip the title review just because you're in a hurry.

Your Next Step

Before you make an offer on any commercial property or an unusually priced residential listing, ask your agent to pull the title commitment and look specifically for leasehold language. If you're not sure what you're reading, call me — I'll walk you through it at no charge.

Knowing what you're actually buying is the whole job.