What is a ground lease and how is buying a leasehold commercial interest different from buying freehold?

A ground lease is a long-term lease of land itself, under which the tenant typically owns and builds improvements, like a commercial building, on land it doesn't actually own in fee simple, while paying ground rent to the landowner for the term of the lease. Buying a leasehold interest in this context means buying the remaining term of that ground lease and the improvements built on it, not the underlying land, and the property reverts to the landowner once the lease term ends unless it's renewed or extended.

This is fundamentally different from buying freehold, where the buyer owns both the land and the building outright, with no reversion date and no ongoing ground rent obligation. A leasehold interest can be attractive because it often costs less upfront, but it comes with its own risks: the remaining term matters a great deal to value, since a leasehold interest with only a short remaining term is worth much less, ground rent may escalate over time, and financing a leasehold interest can be more complex than financing freehold ownership.

Anyone considering a leasehold purchase should review the ground lease terms carefully, including remaining term, rent escalation, renewal rights, and reversion conditions, since these drive both the property's value and its long-term risk.