Introduction to Leaseholds

When people hear about leasehold properties, they often ask: Isn’t the land the part that appreciates in value while the building depreciates? And if that’s the case, wouldn’t that mean the landowner gets all the benefits while the leaseholder is left with a property that loses value over time? Historically, that concern has been valid, but modern leasehold structures are designed to be much fairer.

Let’s break it down and see how leaseholds have worked in the past, where they’ve been unfair, and how a new model can fix those problems.

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The Problem with Traditional Leaseholds

Historically, leaseholds have been problematic because of two major issues:

1. The land appreciates while the improvements (buildings) don’t.
   A tenant or homeowner might invest heavily in a property, maintaining or upgrading the building. But over time, the land value increases due to market demand, while the structure itself wears down. This means the leaseholder doesn’t fully benefit from the rising value of the land, even if they put significant money into improvements.
2. At the end of the lease, the entire property reverts to the landowner.
   In traditional leaseholds, when the lease expires, ownership of both the land and the building typically transfers back to the landowner—sometimes without compensation to the leaseholder. This can make leasehold properties risky investments, discouraging improvements and lowering the value of the property as the lease gets closer to expiration.

Real-World Examples: Commercial Real Estate’s Leasehold Struggles

This problem isn’t just theoretical. We see its effects clearly in commercial real estate, where many buildings sit on long-term leasehold land.

• New York City’s Chrysler Building: One of the most famous cases, the Chrysler Building sits on land owned by Cooper Union. As the land value skyrocketed, lease payments increased dramatically, making it harder to justify further investment in the building itself. When the leaseholder sold their stake, the building’s value had declined, even though the land value had soared.
• Hawaii’s Ground Leases: Many vacation condos in Hawaii have become difficult to sell because the landowners have decided to redevelop the properties once the leases expire. As a result, property values plummet as expiration dates approach, since buyers are hesitant to invest in a property they might not own in the long term. In some cases, leaseholders have been forced to sell at a loss or walk away with little to no equity.

The result in these cases? Leaseholders lose out, while landowners reap all the benefits.

The Solution: A Fair and Flexible Modern Leasehold

The problems with traditional leaseholds are solvable. Jubilee's modern leasehold model ensures that both the homeowner and the landowner share in the benefits fairly, avoiding the pitfalls of old systems. The key changes include:

1. Flexibility: Giving the leaseholder the option to buy the land at any time.
   Instead of being locked into a long-term lease with no escape, homeowners should have the option to purchase the land whenever they choose. They can buy out Jubilee’s interest in the land without selling their home, or they can buy out Jubilee at the same time they sell their building—allowing them to sell it like a normal house.
2. Fairness: Basing the land buyout price on total property appreciation.
   Instead of a fixed price that might become unfair over time, the buyout price should be linked to the total value of the property (land + improvements). That way, the homeowner and the landowner share proportionally in the appreciation of the entire property—not just the land.

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Why This Works for Homebuyers

For many homebuyers, purchasing property is challenging due to the high cost of land. Jubilee’s fair leasehold model allows them to buy the home first and the land later, reducing upfront costs while still providing an equitable path to ownership.

Unlike traditional leaseholds, where uncertainty about future value and lease expiration can discourage buyers, Jubilee’s model removes those risks. Homeowners can build equity, improve their property with confidence, and transition to full ownership when it makes sense for them.

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Conclusion: A Smarter Approach to Leaseholds

Leaseholds have historically been unfair, but they don’t have to be. By introducing flexibility and fairness—offering leaseholders the right to buy the land at any time and ensuring that both parties share in appreciation—Jubilee’s modern leasehold model provides a more sustainable and accessible path to homeownership.

For homebuyers, this means lower barriers to entry, less risk, and a clear route to full ownership. By fixing the problems of the past, Jubilee ensures a more equitable and sustainable solution for anyone looking to purchase a home.