Paralegal Advanced Competency Exam (PACE) Practice Exam

What is meant by 'leasehold'?

1. The rights of a tenant to lease property for an indefinite period

2. A right to hold property for a specified term under a lease

3. The permanent ownership of a property

4. A type of contract that outlines property management

The correct answer is: A right to hold property for a specified term under a lease

The term 'leasehold' refers specifically to an arrangement where a tenant obtains the right to occupy and use the property for a predetermined length of time according to the terms of a lease agreement. This arrangement contrasts with outright ownership—referred to as freehold—where the property owner has an indefinite title to the property. In a leasehold, the lease explicitly states the duration of the lease, the obligations of both the tenant and landlord, and the purpose for which the property can be used. Understanding leasehold is crucial for practical applications in real estate, as it defines the relationship between landlords and tenants, including aspects such as rent payments, maintenance responsibilities, and what happens when the lease expires. The importance of the specified term in a leasehold also helps clarify expectations for both parties involved, allowing tenants to plan their living or business arrangements term-wise while providing landlords with a structured way to manage their properties. The other options do not accurately define leasehold: mentioning an indefinite period does not reflect the key characteristic of a leasehold relationship, which is always for a specified term. Permanent ownership describes freehold rather than leasehold, and a type of contract outlining property management does not capture the specific legal framework governing lease relationships.