In Toronto real estate, freehold simply means that you own your house and the land it sits on, outright. Love the independence of no condo fees and no shared walls!
Freehold homes remain the top choice for homebuyers in Ontario. They appreciate the autonomy to renovate, maintenance, and access to private outside space.
Recognizing freehold allows us to better advise our clients to find the right type of property. After that, we take a closer look at the key advantages and disadvantages for Toronto buyers.
What Exactly is Freehold Ownership?
This freehold ownership provides us with the ultimate legal power over the land itself and everything that is built on it. We control the land, the structures, and the soil under it without a white friend or master needing a cut. In the Greater Toronto Area and across Ontario, this form of home ownership is king.
Long term, people really love it so it’s by far the most popular option. With freehold, our rights and responsibilities are codified. We can keep, renovate, rent, or destroy our house as long as we observe local bylaws. There are no third parties or landlords to complicate matters.
This permanence, which is embodied in the very term freehold, provides a solid foundation for family planning, investment, and the pursuit of individual liberty.
1. Defining True Property Ownership
When we own a freehold property, we own all of the rights to the land and the building. We’re not sharing these rights with a property manager or a condo board. Unlike leasehold or commonhold, with freehold we have the exclusive authority to change, add, or even take down buildings.
At one end of the spectrum, we can build an addition, finish a basement, or knock down a wall. Well, just be sure to play by the city’s regulations! This degree of mastery enables us to create our space to suit our desires.
Shared ownership, on the other hand, is usually encumbered with covenants and a requirement to seek permission. With freehold, we have the control that allows us to set the terms.
2. Understanding Your Absolute Control
Freehold allows us to make decisions about how the property is used, rented out, or sold in the future. Plan to one day rent out a basement apartment or sell the house tomorrow. It’s a choice we make though.
We want to make improvements, whether we want to renovate kitchens, add bedrooms, or even change the landscaping – we can do it without asking anyone’s permission. This independence usually translates into higher happiness and superior return on investment over time.
As a result of us being in absolute control, our investment is able to flourish in the manner that we envision.
3. The Land Beneath Your Feet Matters
In Toronto, we know how land is finite and precious. Freehold ownership of the church means we own the dirt under our feet as well as the building. This protects us from future development misfortune, such as the loss of rights or imposition of new fees.
Land generally only appreciates in value, providing additional security as well as a potential source of profit. With our name on the land title, it’s clear we have rights and it simplifies selling or passing down property.
4. How It Differs Fundamentally
Unlike leasehold, freehold ownership is perpetual – no expiry dates or renewal hassles. We have 100% of the maintenance burden, as opposed to condo owners who might share in some costs.
This loss of control can lead to increased property taxes, but it leads to increased property value and more flexibility when selling. Buyers in Ontario have an overwhelming preference for freehold since it’s clear, simple, and provides the greatest marketability.
5. Historical Roots of Freehold Tenure
Freehold rights started centuries ago, shaping today’s real estate rules. These initial statutes established the groundwork for obtaining land in fee simple, which has subsequently snowballed into the current freehold ownership systems we utilize today.
Important developments, such as the reforms associated with the English common law, formed the basis for Ontario’s clear, secure property rights today.
6. Evolution of Freehold Laws
Through the years, freehold has been shaped by government regulations that have altered the rights, responsibilities, and protections that freeholders have had. These laws influence whether we’re able to purchase, sell, or inherit land.
Today, we enjoy the deep legal protection that makes our ownership secure and simple.
Freehold vs. Other Ownership Types
In Toronto and across Ontario, property ownership must discourage better management practices. It raises the cost of development and worsens the property’s location value over time. As real estate lawyers, we see every day the value of having a grasp on these differences. Buyers, sellers, and investors should understand them as early in the process as possible.
Below, we define the main characteristics in the ownership between freehold, leasehold and condominium ownership types as it applies to the Toronto market.
| Feature | Freehold | Leasehold | Condominium/Strata |
|---|---|---|---|
| Ownership Duration | Unlimited | Fixed term (e.g., 99 years) | Unlimited (unit & shared) |
| Land Ownership | Owner owns land + building | Leaseholder owns building rights | Corporation owns land |
| Modification Rights | Broad autonomy | Restricted by lease terms | Restricted by bylaws |
| Maintenance | Owner responsibility | Leaseholder or landlord | Shared via fees |
| Inheritance | No restrictions | May be limited by lease | No restrictions |
| Cost | Higher upfront | Lower upfront, may have ground rent | Moderate + monthly fees |
Spotting the Key Differences
In contrast, freehold conveys absolute control along with perpetual ownership. We can observe this today in detached singles across the GTA, where the owner of a house owns both the land and the structure above it.
With leasehold, like some homes in Alberta or certain Toronto co-ops, you buy the right to stay for a set period – often 99 years. Unlike a freehold, you don’t own the land; you only own the home. Note that the lease could have renewal expenses and might actually terminate with a surrender clause.
This difference shapes investment decisions: freehold is often pricier, but it brings more security and no lease renewal headaches. Flexibility is yet another advantage – freehold owners can modify or enlarge their homes, subject to municipal regulations.
Leaseholders don’t own their improvements and are required to adhere to lease restrictions and obtain approval for changes, curtailing flexibility. Another major financial advantage with freehold? No ground rent – which translates into lower long-term ownership costs than leasehold.
Freehold Compared to Leasehold
Freehold ownership gives greater creative freedom as well as stability. Our observation is that families and long-term investors gravitate towards freehold, as there is no risk of a lease expiring.
Lenders tend to prefer freehold as well, which can make financing much smoother. Banks look very closely at leaseholds; some will refuse to finance your business on a lease expiring within five years of your loan term.
Though leasehold can appear cheaper in the short term, renewal fees and ground rent increase the long-term cost significantly. Freehold eases inheritance: there are no restrictions on passing property to your heirs.
Freehold Versus Condominium/Strata Title
Freehold owners have greater autonomy. They don’t have to share maintenance or regulations with others, as condo or strata owners do when they need to abide by a board’s bylaws.
Condos, which dominate Toronto’s downtown core, provide shared amenities and maintenance, but with reduced autonomy. Property taxes differ too: freehold owners pay based on their own lot, while condo taxes are split over the building.
Freehold strata has been well-received, particularly in some parts of British Columbia. It provides an alternative hybrid condo model of unit ownership and common property ownership.
Understanding Common Elements in Condos
Condos come with shared spaces – lobbies, gyms, elevators – called common elements. Owners pay monthly fees for their upkeep, and all must pitch in.
This can boost convenience and security, but means less say over how things are run. Major repairs or upgrades often trigger special assessments, which impact every owner’s wallet.
Your Rights and Duties as Owner
With their ownership of freehold real estate in Toronto, come very large rights, and very specific duties. This legal status provides us the most control over our property, enabling us to protect our land and buildings. We cherish the ability to be flexible, but bear the burden of maintenance, property taxes and following local statutes. Here’s what all of this means in practical, day-to-day terms.
Enjoying Full Property Use
As fee-simple owners, we have the right to choose what we do with our land. If we want to live in the home, rent it out, or even just let family and friends visit freely, that’s our call. No restrictions by landlords or condo associations restricting access of guests or availability for short-term rentals.
This liberty fosters whatever form of habitation – expanding households, domestic entrepreneurship, or rental property – that the economic times may call for. We can look ahead and make long-term plans because we know there isn’t some arcane regulation that would derail those plans down the road.
There are no restrictions as to who can inherit. This will allow us to more easily pass property that we own directly on to our children or heirs.
Responsibility for Maintenance and Repairs
With that control comes the responsibility of maintaining the property and ensuring it’s a safe and functional space for all. We’re responsible for all maintenance, tend to the gardens, and any home repairs – no condo corporation or landlord to call when the sink backs up.
If you own your home, this translates to saving for roof repairs and plumbing fixes, and planning for ongoing maintenance. Performing routine maintenance and making needed repairs helps us protect our investment and property value.
Failing to uphold these responsibilities may result in penalties from the city or lawsuits from neighbors. This is particularly so if the house in question is a safety hazard to other residents.
Navigating Property Taxes and Fees
Every year, we pay property tax to the city, based on the home’s assessed value. This is a key cost to plan for, as missing payments can lead to penalties or, in rare cases, legal action.
On the plus side, freehold owners can claim tax breaks – such as deductions for home loan principal and interest, plus a standard deduction of 30% of rental income for repairs. Unlike condo or leasehold owners, we don’t pay monthly maintenance fees or ground rent, which helps us control long-term costs.
Understanding Local Bylaws and Zoning
Toronto’s zoning and bylaws directly impact the extent of what we’re able to create or modify on our own property. Even for fairly straightforward changes – adding a deck, putting a bedroom on the second floor – first we have to understand the bylaws on the local level.
Not adhering to local bylaws can lead to expensive fines or having to modify your operation. We can’t underestimate the effect zoning has on property value. Properties found in neighborhoods that are zoned for mixed use or greater density are more likely to see faster increases in property value.
Understanding these rules from the outset prevents us from being surprised and allows for better, more strategic investments.
Dealing with Covenants or Restrictions
Some freehold properties have covenants – additional rules that are attached to the land. These considerations can limit the height of buildings or their exterior color palette. They might even control what type of business we can run out of our house.
Reading these before you buy is essential. Enforcement of a covenant may result in conflicts with neighbors or the city. Whether they’re called rules, regulations, or covenants, knowing these can save you from trouble while helping maintain harmony in your neighborhood.
Unlike leaseholds, there’s no third party to resolve conflicts, so we navigate conflicts ourselves.
Why Freehold Boosts Investment Security
Long-term value and stability – Freehold ownership is a rarity in Toronto’s real estate market, particularly for investors that want to own an asset of lasting value. When we say freehold, we mean a piece of property. In addition, the owner has full control over the land and the building.
This degree of freedom is not found in most other ownership models that involve limitations or continued payments. For the rest of us aspiring to build wealth, freehold properties are the only clear choice for a secure long-term investment. Let’s unpack why this is so important for investors in this GTA.
Building Long-Term Equity
Freehold ownership places equity growth firmly in our own hands. Toronto is experiencing skyrocketing property values. Freehold properties tend to appreciate at a rate of 4.5% per year compared to the 2.8% growth rate of condo apartments, helping our investment grow in value over the long term.
Each mortgage payment increases our equity, a vast improvement over renting or leasing. This equity subsequently becomes a financial resource, allowing us to refinance under more favorable terms or use the property to invest in new opportunities. That’s another $200 to $300 we save each month – there are no monthly association dues. Over the life of the loan, that amounts to many thousands in equity retained!
Greater Control Over Value Appreciation
With freehold, we own the land. We can renovate kitchens, add inlaw suites, landscape the yard – all without asking anyone else for permission. Finally, strategic upgrades – whether it’s energy-efficient windows or a finished basement – can increase value.
Our location in Toronto’s vibrant neighborhoods further fuels appreciation, and we have greater ability to react to local market demand with proactive, value-added renovations. Routine management activities like proactive maintenance help make sure that our building is always competitive and desirable in our market.
Attractiveness for Resale Potential
Freehold homes have great resale appeal to buyers. They often receive higher resale values than apartments, in particular in areas of high demand. Freehold townhouses, for instance, typically draw higher offers compared with condo townhouses.
Buyers appreciate the permanence and autonomy that freehold properties provide. Consequently, these homes are easier to resell and command multiple competitive bids. This demand directly corresponds with long-term financial returns for our portfolio of investments.
Freedom for Renovations and Upgrades
We are able to cement these properties as ours in ways that go beyond the economic. We can build a new deck, renovate the bathrooms, alter the exterior – all things we could not do under a historic designation. Those condo board rules aren’t going to stop us!
These personal touches very much augment our use and enjoyment of the space. They boost rental yield and property value, providing greater potential for income generation. Moreover, there’s pride in knowing we designed a home that is a reflection of our vision and abilities.
Freehold’s Impact on Financing
In the competitive Toronto real estate market, freehold properties are at an incredible advantage. Buyers no longer have to search hard to find flexible, attractive, and secure financing options. Under freehold ownership, these buyers own their residence and the land it sits on, providing lenders with a robust security interest.
This form of ownership helps to make financing easier and more certain. It makes lending difficult. Banks only want to lend on freehold homes since they would not have to deal with the challenges when a lease expires. In contrast, with leaseholds, lenders often cap loans at properties with a lengthy lease term still to go, often requiring at least five years beyond the mortgage’s duration.
Freehold purchasers would be subject to a much bigger property transfer tax as the actual land is part of the acquisition. Even so, this frequently means a simpler deal overall and wider mortgage availability.
Mortgage Options for Freehold Homes
This is where we’d like to see a broad range of mortgage products made available to freehold properties throughout Ontario. When buying a freehold home, you have your pick of traditional mortgage options. Options like fixed-rate mortgages, variable-rate mortgages, open or closed terms, and home equity lines of credit are all widely available.
Lenders often price their interest rates according to the amount of security provided by the type of property. Freehold homes, seen as lower risk, are able to command better rates than leaseholds. That means our clients can shop for terms that fit their long-term goals, whether that’s predictable payments or flexibility for early repayment.
Shopping around for mortgage offers is still incredibly important. Even small differences in rates or fees can become significantly larger sums over the life of a loan. We are consistently encouraging our clients to talk to seasoned mortgage brokers or their banks. In this manner, they can explore every option on the table before deciding where to invest.
How Lenders View Freehold Security
Lenders are generally more comfortable with freehold properties. Complete ownership ensures the property has value regardless of the terms or even existence of any leases or ground rents. This increased security results in increased approval rates as well as lower overall interest costs.
Borrowing against a freehold home can further free up equity for renovations or other investments. Yet lenders consider credit scores and income stability, so practicing solid financial responsibility is still essential. Providing clear and complete information to your lender upfront is important.
It can save you headaches down the line and increases your leverage in negotiations.
Insurance Needs for Freehold Properties
Owning a freehold home means you’re completely responsible for the upkeep of the structure and land. This means insurance needs are more comprehensive than with a condo or leasehold. Typical home insurance policies include liability coverage and, in some cases, riders for flooding or earthquakes.
Insurance premiums vary depending on the size of the property, where it is located, and how it was built. We advise all our clients to go over their coverage at least once annually. This makes sure it’s appropriate to the value of the property and their risk appetite.
Even for the most careful investors, adequate coverage is needed to ensure against unforeseen expenses that can jeopardize long-term investment.
Legacy Planning with Freehold Property
For numerous families with Toronto and the broader Ontario region, legacy planning with freehold property fits the bill. This strategy helps them create a truly lasting legacy for their family. To freehold property means to own the land and any improvements made to it, in perpetuity. This provides us with liberation, safety, and autonomy.
From our experience, there is no better legacy asset than freehold property. It does this by acting as a long-term, stable pillar of family wealth. Passing freehold property down to heirs provides unarguable benefits to those heirs. Without any legal restrictions on inheritance, we’re able to pass these assets to our next generation and avoid drama.
This is a huge difference from leasehold properties, where terms and rights are often murkier. Freehold ownership means no ground rent payments, fewer usage limits, and the comfort that property can stay in the family for as long as we wish. Urban growth and high demand may be pushing property values higher in Toronto and the GTA. The long-term benefits of keeping a freehold property in the family can pay off for many generations.
Incorporating freehold property into legacy planning is essential. When writing or revising wills, we pay careful attention to delineate how each piece of property will be dealt with. Written guidelines remove miscommunication and prevent friction between beneficiaries. A freehold property’s value will greatly affect the overall estate value.
It pays to check property values often. As always, we advise that you consult with professional legal counsel. Because laws surrounding inheritance, taxation, and ownership change frequently, working with an expert allows you to be confident that your knowledge is up to date.
Passing Down Your Real Estate
Transferring Down Legacy Ownership begins with clearing the deed title and making sure all documentation is up to date. What do we do after this is done? Next, we go about revising our wills to name beneficiaries. In probate, the executor completes the transfer with the backing of legal documentation.
Starting conversations with heirs early on keeps their expectations managed and reduces the risk of them being blindsided. Freehold properties make it much easier. You will avoid having to renegotiate terms or find new landlords, making the legal process clearer-cut.
Estate Planning Considerations Specifics
Freehold assets are often the cornerstone of robust estate plans. Periodic will reviews ensure everything stays up to date, particularly after the purchase or sale of real estate. Market value is important for tax planning and in deciding how we divide properties among heirs.
For complex estates, especially those with multiple properties or mixed ownership, we turn to legal and financial experts for tailored advice.
Freehold as a Generational Asset
Freehold properties are a strong tool to develop generational family wealth. They offer both financial stability and a sense of belonging – knowing a family home or cottage will be there for future generations strengthens family ties. Clients usually make the decision to retain properties within their families.
They deeply appreciate the financial investment but even more the memories, connections, and roots that those properties afford. As such, protecting these homes and planning for their future use is a way to protect both wealth and tradition.
Common Freehold Property Styles
Amidst Toronto’s increasingly competitive real estate landscape, freehold properties provide a unique feeling of true ownership that can be hard to find. Freehold has provided us with total autonomy over our landscape, dwelling, and resources. There are no limitations on how we can use it or transfer it, unlike condos or leaseholds.
This freedom, while sometimes taken for granted, seriously impacts our lives and where we invest our money. Detached single-family homes, semi-detached homes and duplexes, and freehold townhouses all have their advantages. These property styles offer something for everyone’s interest and objective.
Some of the most common freehold property types in Ontario include:
- Detached single-family homes
- Semi-detached homes
- Duplexes
- Freehold townhouses (non-condo)
- Residential plots
Each style appeals to unique lifestyles and investment strategies. So, let’s unpack what distinguishes one from the next.
Detached Single-Family Homes
Detached homes are usually the most common home style found in suburban areas. We often view these large properties as the gold standard for privacy and space. As the situation is today, owners can alter, expand, or rebuild without needing approval from a condo board or landlord.
This flexibility is a huge attraction for families that desire a backyard, space to expand, or even their own pool. In Toronto, detached homes are still very prized possessions and due to a chronic lack of availability, enjoy significant price appreciation as a result.
This style places no restrictions on ownership, the most common estate called “fee simple absolute.” It provides the greatest degree of freedom as well as the best possibility for future value increase.
Semi-Detached and Duplexes
Semi-detached homes often have two or three units, sharing only one wall with a neighbor. Often, these properties are less expensive than detached homes, allowing first-time buyers or small families the opportunity to purchase a home.
Lower heating bills and maintenance costs come from shared walls. For families who love being connected to community, but want a little space, these homes provide a perfect compromise. They are attractive for owners because of the flexibility they offer.
You can occupy one unit and lease the other, making it a prevalent choice for producing supplemental income or multi-generational living.
Freehold Townhouses (Non-Condo)
A non-condo freehold townhouse (not covered by an owners’ corporation) is located among a row of them. Unlike condo townhouses, owners have full control over their unit and the land under it. With no monthly condo fees to upkeep shared areas, we’re able to budget much more predictably.
Townhouses attract young professionals, empty nesters, or busy families seeking less upkeep without losing control of their land. In addition, these homes tend to create a stronger sense of community since neighbors live with walls between them but not expense.
This is why freehold townhouses are attractive to investors. They provide many of the benefits of freehold ownership but at a lower price point than detached homes.
Avoiding Potential Freehold Pitfalls
Owning a freehold property in Toronto means gaining full independence and full accountability. The seductive allure of passing down property to heirs free and clear, with no strings attached, is hard to resist. Yet with this independence, presents some formidable challenges.
One way we assist our clients in making better decisions is by calling attention to the pitfalls that are most often encountered. We include lessons learned to avoid a premature pitfall.
Some of the most frequent freehold pitfalls we see include:
- Underestimating hidden or ongoing costs
- Overlooking property boundary issues
- Failing to review restrictive covenants
- Skipping due diligence before purchase
Each of these can fester from a minor mistake into a significant nuisance if not addressed at the outset. So, let’s take a closer look at what they are.
Hidden Costs of Full Responsibility
When we purchase freehold, we assume all expenses associated with the home. Unlike condos or leaseholds, where fees might cover some maintenance, freeholds require us to budget for everything from routine repairs to major updates.
Property taxes, determined by the city of Toronto, are another level on top of that. While these taxes are based on the capital’s annualised value, they can lead to steep increases in rates. If a pipe bursts or the roof goes, those bills fall entirely on us.
A number of buyers neglect to consider these emergencies, which is enough to derail financial plans. We never let clients leave the nest without encouraging them to get a clear accounting of the known and unknown costs before closing their deal. Transparency is key in any transaction.
Boundary Disputes and Surveys
Boundary disputes are inevitable when boundaries lack clarity. Without a current survey, it’s impossible to determine where the lot starts and stops, let alone why the neighbor’s lot seems to be larger.
In leaseholds, the landowner can sometimes play a role in mediation. For would-be freeholders, it’s time to hash this out amongst us. These disputes may result from the placement of fences, trees, or even driveways.
We emphasize the importance of obtaining a comprehensive survey prior to extending an offer and using precise language in all contracts. If problems do occur, a measured and good-faith collaborative spirit will usually get them solved more quickly and cheaply.
Understanding Restrictive Covenants Early
Restrictive covenants are rules that place limits on what we can (or cannot) do with our land. These could pertain to building height, exterior materials, or even the removal of existing trees.
Not addressing these early on can result in expensive modifications or litigation down the road. We assist clients to understand restrictive covenants and review any which may be attached to a title so they fully understand what is permissible and what is not.
Clarity up front prevents future disputes with neighbors or the city.
Importance of Due Diligence
Due diligence doesn’t just require vetting the big picture before we buy. This means checking title status, zoning, outstanding taxes, or liens.
That means doing your research on the market – what other homes like it are selling for, and how’s the market trending in that area. Having a real estate lawyer with extensive Toronto experience can make all the difference.
We know where to look for red flags and guide our clients away from making mistakes that could be very expensive.