What does the term “leasehold interest” mean in real estate?

The term "leasehold interest" refers specifically to a temporary right to use and occupy property. This concept arises in situations where an individual or entity (the lessee) enters into a lease agreement with the property owner (the lessor), allowing the lessee to occupy and utilize the property for a defined period of time, usually in exchange for rent. The leasehold interest does not confer ownership of the property itself; rather, it grants the lessee rights that are limited to the duration of the lease agreement.

This interest is crucial in real estate as it defines the legal rights of both parties involved in the lease. For instance, the lessee has the right to use the property as stipulated in the lease, while the lessor maintains ownership of the property. This distinction is fundamental in property law and real estate transactions.