What is the definition of a leasehold interest in real estate?

A leasehold interest in real estate is defined as an agreement granting a tenant the right to use property owned by another party for a specified period. This definition encapsulates the nature of a leasehold, where the landlord (lessor) retains ownership of the property, while the tenant (lessee) secures the legal right to occupy and utilize that property under the terms specified in the lease agreement. This arrangement allows the tenant to enjoy certain rights associated with the property, such as residential or commercial usage, without transferring ownership.

The concept of a leasehold interest is fundamentally tied to the idea of a time-limited arrangement, which is a critical aspect of such agreements. The specified period can vary widely, encompassing short-term leases as well as long-term arrangements, but the key point is that the tenant does not have perpetual ownership; their rights are bounded by the duration of the lease.

Understanding this definition is essential in real estate since it distinguishes leasehold interests from other forms of property ownership, such as fee simple ownership, where the owner has complete and indefinite rights to the property. This distinction underlies various legal, financial, and practical considerations in real estate transactions and property management.