A leasehold interest vests in the lessee certain occupation rights in land for a defined period of time. The rights
are created by contract between the owner of the land (lessor) and the occupier (lessee).
Remember if you purchase a dwelling or commercial building located on a piece of leasehold land – you DO
NOT OWN the land component.
Perpetually Renewable Leases
These are commonly found with some of the older residential leasehold arrangements. They are often referred
to as ‘Glasgow leases’. They are typically renewed either every 7, 14 or 21 years, depending on what is
specified in the contract. They may be renewed indefinitely, as long as the lessee adheres to his or her part of
the contract.
Typically the ‘ground rent’ is renegotiated at renewal date. The most common way to establish the new rental
figure is to link it to the land value. This percentage of land value is sometimes defined in the contract and other
times it is not. In the latter instance rents are renegotiated at a rate dictated by the market.
It is considered that the lessee in a perpetually renewable situation has a saleable interest in the land. This can
be calculated mathematically. Refer to the Leasehold Interest Calculator. Lessees Interest Calculator
WARNING: some new apartments are now being established with ground rents in place. If you buy into one of
these, always ensure that future rental increases are defined by formula in the leasing agreement, otherwise
you could be in for an unpleasant surprise.
Terminating Leases
These ground leases have a defined termination date, at which time the lessee is required to vacate the site.
Whether the lessee can remove the buildings at that time will depend on the terms contained in the lease
agreement.
All Maori ground leases (including pastoral leases) have been transformed from perpetually renewable
arrangements and all are now terminating leases.
are created by contract between the owner of the land (lessor) and the occupier (lessee).
Remember if you purchase a dwelling or commercial building located on a piece of leasehold land – you DO
NOT OWN the land component.
Perpetually Renewable Leases
These are commonly found with some of the older residential leasehold arrangements. They are often referred
to as ‘Glasgow leases’. They are typically renewed either every 7, 14 or 21 years, depending on what is
specified in the contract. They may be renewed indefinitely, as long as the lessee adheres to his or her part of
the contract.
Typically the ‘ground rent’ is renegotiated at renewal date. The most common way to establish the new rental
figure is to link it to the land value. This percentage of land value is sometimes defined in the contract and other
times it is not. In the latter instance rents are renegotiated at a rate dictated by the market.
It is considered that the lessee in a perpetually renewable situation has a saleable interest in the land. This can
be calculated mathematically. Refer to the Leasehold Interest Calculator. Lessees Interest Calculator
WARNING: some new apartments are now being established with ground rents in place. If you buy into one of
these, always ensure that future rental increases are defined by formula in the leasing agreement, otherwise
you could be in for an unpleasant surprise.
Terminating Leases
These ground leases have a defined termination date, at which time the lessee is required to vacate the site.
Whether the lessee can remove the buildings at that time will depend on the terms contained in the lease
agreement.
All Maori ground leases (including pastoral leases) have been transformed from perpetually renewable
arrangements and all are now terminating leases.
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
| Leasehold Land |
Terminating Lessees Interest
Remember at the termination of the lease, you have no further occupancy rights. The value therefore will
depend on whether you can legally and physically recover any of the assets attached to the land. Some
buildings might be of a nature where they cannot be transported, while others can be relocated.
A terminating lessee’s interest would have an interest similar to the present value calculation above (without the
interest in the right of renewal).
However the value of any buildings would need to be discounted back depending on what can be recovered
at lease end.
The values of property on terminating leases reduce substantially as lease end approaches.
Warning: Valuation of Leasehold interests is always complicated. If you intend
to purchase a property on leasehold land, always obtain Legal and Valuation
advice first.
Remember at the termination of the lease, you have no further occupancy rights. The value therefore will
depend on whether you can legally and physically recover any of the assets attached to the land. Some
buildings might be of a nature where they cannot be transported, while others can be relocated.
A terminating lessee’s interest would have an interest similar to the present value calculation above (without the
interest in the right of renewal).
However the value of any buildings would need to be discounted back depending on what can be recovered
at lease end.
The values of property on terminating leases reduce substantially as lease end approaches.
Warning: Valuation of Leasehold interests is always complicated. If you intend
to purchase a property on leasehold land, always obtain Legal and Valuation
advice first.
 |  |  |  |  |
Innovation + Experience |
| PO BOX 9018, Wellington 6141 | phone: (04) 240-0124 | fax: (04) 232-4414 | email: valuer@ vcnz.co.nz Innovation + Experience |