What is a leaseback in real estate?

A leaseback in real estate represents a financial arrangement where the seller retains the right to occupy and use the property after selling it by agreeing to lease it back from the buyer. This structure allows the seller to convert the property's equity into cash while still being able to operate from the premises.

In practice, leasebacks can be beneficial for businesses looking to unlock capital tied up in real estate without having to relocate. The buyer gains a reliable tenant in the seller, often at market rates, which can provide a steady income stream. This arrangement is particularly common in commercial real estate, where businesses may need liquidity to reinvest in operations or pay off debts while ensuring they maintain their operational continuity.

The other options do not accurately describe a leaseback. A prohibition on selling a property defines contractual limitations but does not align with the idea of leasing back an asset. A method of property appraisal focuses on determining value, rather than a financial transaction structure. Zoning regulations pertain to land use and developmental controls, not the intricacies of a leaseback arrangement in real estate transactions.