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I am interested in a property and approximately 300 acres of associated land in the UK. The has a 1000 year long lease with a peppercorn ground rent and no service charge. I understand that every case is different and you aren't psychic, I have not as yet seen a copy of the lease which will answer this question in relation to my specific case, but I am interested in the general case.

  1. What benefit does selling such a leasehold confer to the freeholder, which sale of the relevant freehold would not?

  2. Does such a lease provide a clue as to the situation in which the leasehold was sold? Possible (but likely incorrect) example: The seller was in shared ownership of the freehold and they were granted a long leasehold to prevent needing to renew the lease, but allow the person rights over the land.

  3. What general disadvantages does owning such a leasehold have in comparison to owning the freehold, other than the possibility for a specific lease to limit the leaseholders rights over the land?

2 Answers 2

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I quote one other reason for 999 year leaseholds, rather than simply freehold. Roger J. Smith, Property Law (10th edn, 2020 Pearson), pp 372-3.

Lengths and types of leases

The lease is found in many different forms: it has sufficient flexibility to render it suitable for a wide range of circumstances. One might take an example of a 10-year lease of shop premises at a full rent.2 Such leases are very common and fit most people’s ideas as to what a lease is. Very different is a 999-year lease in return for a substantial capital sum (a premium, or fine) and a nominal rent. Strictly speaking, there is no need for any rent, but it is usual to stipulate for a nominal sum, or else one peppercorn (hence the term ‘peppercorn rent’). The economic effect of such a lease is virtually identical to a fee simple: the lease is likely to be chosen because covenants are more easily enforced in a lease than on a grant of the fee simple. [my emphasis] Halfway between these examples would be a 99-year lease with a mixture of rent and premium. This may be seen as a useful tool by a landlord who can foresee the need to redevelop the site in the future.

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  • Are there any real contracts that ask literally for "one peppercorn"? And over 999 years things will change, so in 600 years it might be extremely hard to find any peppercorns?
    – gnasher729
    Jul 4, 2022 at 8:27
  • @gnasher729 in 1976, Queen Elizabeth visited Trinity Church in New York and accepted 279 peppercorns in back rent from the rector. Surely this would not have happened if there hadn't been an actual document specifying a literal peppercorn rent, and surely that's not the only such document. Also, in the renaissance and early modern period there was little to no awareness of the possibility and implications of climate change.
    – phoog
    Jul 4, 2022 at 10:48
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What benefit does selling such a leasehold confer to the freeholder, which sale of the relevant freehold would not?

It reverts to the freeholder (or more specifically, their heirs or assignees) after 1,000 years

Does such a lease provide a clue as to the situation in which the leasehold was sold? Possible (but likely incorrect) example: The seller was in shared ownership of the freehold and they were granted a long leasehold to prevent needing to renew the lease, but allow the person rights over the land.

Quite a lot of land in England is under such long term leases. It was a common way for the landed nobles to get long term cash flows without losing title to the land. Of course, most such leases were made when there was no such thing as inflation which has made the rental laughably small.

What general disadvantages does owning such a leasehold have in comparison to owning the freehold, other than the possibility for a specific lease to limit the leaseholders rights over the land?

As above.

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