Hawaii Pre-Licensing National Practice Exam

What typically distinguishes a leasehold tenant from a freehold tenant?

1. Duration of the lease

2. Ability to modify property

3. Ownership of the property

4. Types of property leased

The correct answer is: Ownership of the property

A leasehold tenant is defined by the nature of their interest in the property, which is fundamentally different from that of a freehold tenant. Leasehold tenants do not own the property; instead, they hold a lease for a specific duration, allowing them to use the property in exchange for rent. This contrasts sharply with freehold tenants, who do have ownership rights in perpetuity or for an indefinite period, giving them full control over the property. The distinction arises from the underlying legal rights associated with the interests. In a leasehold situation, the property owner (lessor) retains ownership while granting a temporary right of possession to the lessee (leasehold tenant). This temporary nature of possession and the related rights and responsibilities characterizes leasehold tenancy, while the freehold interest confers full ownership rights, along with the ability to modify, sell, or otherwise utilize the property without the constraints present in a lease agreement.