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What Is A Land Lease And How Do They Work?

If you’ve ever looked at a property listing and noticed the words “land lease” or “leasehold property”, you might have paused and wondered what that actually means. It’s not something most of us hear every day, especially when we're shopping for a home. But in some areas, including parts of the Greater Toronto Area, land lease communities are more common than you might think.

So, what is a land lease? How is it different from a traditional property sale? And is it a good idea to buy one?

In this blog post, we’ll break it all down in simple, easy-to-understand language. You’ll learn:

• What a land lease is and how it works
  
  

• The pros and cons of buying a home on leased land
  
  

• Who typically chooses land lease properties and why
  
  

• What to watch out for before signing on the dotted line
  
  

If you’re thinking about buying or selling real estate, understanding the ins and outs of land leases can help you make smarter decisions. Let’s get into it!

What Is a Land Lease?

A land lease, also known as a leasehold, is a type of real estate agreement where you own the building or structure (like a house or condo), but you do not own the land it sits on. Instead, you lease the land from someone else—usually for a fixed period of time.

Here’s a simple way to think about it:

• You own the home
  
  

• You lease the land underneath it
  
  

The land is typically owned by a private landowner, corporation, or government body. You sign a lease agreement, usually for 20 to 99 years, and pay monthly or annual rent to use the land.

Common Types of Land Leases

1. Residential Land Leases

These are most common in retirement communities, mobile home parks, or cottage areas. You own the home but lease the plot it sits on.

2. Condo Land Leases

Some condominiums are built on leased land. You own your unit, but not the land the condo building is on.

3. Commercial Land Leases

Businesses lease land to build things like restaurants, gas stations, or retail stores.

How Do Land Leases Work?

Here’s a step-by-step explanation of how the process usually works:

1. Lease Agreement Signed
   You enter into a lease agreement with the landowner. This document lays out how long you can use the land and what you’ll pay.
   
   

2. You Buy the Structure (Home or Condo)
   You buy the home just like you would any other property, but you’re not buying the land.
   
   

3. Monthly Lease Payments Begin
   You’ll pay the landowner a regular fee—monthly, quarterly, or annually—to rent the land.
   
   

4. Lease Terms Apply
   These might include rules about maintenance, improvements, or even resale conditions.
   
   

5. Renewal or End of Lease
   When the lease ends, you may be able to renew it—or you may have to leave. This depends on the terms of your agreement.

Pros of Land Leases

✅ Lower Purchase Prices

Homes on leased land usually cost less up front than similar homes with land ownership. This can make them more accessible for first-time buyers or retirees.

✅ Lower Property Taxes

Since you don’t own the land, you’re often taxed only on the value of the structure—not the full property.

✅ Location, Location, Location

Land leases may allow you to live in prime areas—like near lakes, in retirement villages, or close to city centres—at a lower cost.

Cons of Land Leases

❌ You Don’t Own the Land

This means you won’t benefit from the appreciation of the land’s value over time.

❌ Monthly Land Fees

In addition to your mortgage, you’ll pay regular land lease fees, which can increase over time.

❌ Resale Challenges

Some buyers are wary of land leases. That can make it harder to sell your property later.

❌ Financing Can Be Tricky

Some banks are cautious about lending money for leasehold properties—especially if the lease term is short or near expiry.

Who Typically Buys Leasehold Properties?

• Retirees: Many choose land lease communities that are affordable and well-maintained.
  
  

• First-time homebuyers: Lower prices can make land leases more accessible.
  
  

• Cottage seekers: Seasonal properties are often found on leased land.
  
  

• Downsizers: People moving from large homes into more manageable spaces.
  
  

What to Look Out For Before Buying

Before you buy a land lease property, be sure to:

• Read the lease agreement carefully: Know how long the lease is and what happens when it ends.
  
  

• Understand the fees: Ask about current and future land lease payments.
  
  

• Check the renewal terms: Can you renew when the lease is up? At what cost?
  
  

• Look into financing: Will your lender approve a mortgage for this property?
  
  

• Ask about resale value: How do similar homes sell in the area?

Are Land Leases Common in Ontario?

Yes! While they’re not the most common form of property ownership, they do exist in many parts of Ontario, especially in:

• Retirement communities
  
  

• Indigenous reserves (where the land cannot be sold)
  
  

• Waterfront areas and cottage zones
  
  

• Some urban developments and co-op housing
  
  

In and around the Greater Toronto Area, you may come across leasehold condos or land lease retirement communities in places like Durham, Peel, and Simcoe County.

Is a Land Lease Right for You?

A land lease can be a smart and affordable way to get into the housing market—if you understand the terms and make a decision that fits your long-term plans. For some people, especially retirees or those downsizing, the lower upfront cost and reduced maintenance can be very appealing. For others, the lack of land ownership may be a deal-breaker.

It all comes down to what you value most: lower costs today or full ownership for tomorrow.

Final Thoughts: Work with a Trusted Local Real Estate Team

Whether you're buying your first home, looking for a retirement property, or just curious about land leases, it’s important to have the right real estate team by your side.

At The Johnson Team, we’ve helped countless homebuyers and sellers in the Greater Toronto Area find the best opportunities—land lease or freehold—and negotiate the most favorable terms. With our strong market knowledge, client-first approach, and years of experience, we’re ready to guide you through every step of your journey.

If you're thinking about buying or selling a property and want expert advice, top-notch service, and a team that truly cares, we’d love to hear from you.

???? Ready to start house hunting or thinking about listing your home? Contact The Johnson Team today to connect with a trusted agent who will put your needs first.