The 99 year lease contract

The 99 year lease agreement is a Long Term Lease capable (the lessee is entitled to
compel the lessor to register the lease, ensuring protection for the lessee) of registration
in the Deeds Office against the title deed of the subject land. The lease is registered in the
form of a notarial deed against the title of ownership by the Lessor (the person letting the
property) in favour of the Lessee (the person to whom the property is let).

At registration of the notarial deed, the lease agreement confers a real right (this means
that the lessee as holder of a real right has a right to a thing, in this case the thing is the
undisturbed use and enjoyment of the property let to him) in the property leased upon the
lessee. The lessee can at any time enforce his real right against the lessor and all of his
(lessor) successors in title in the ownership of the property (No person other than the
lessor can deprive the lessee of occupation, as long as he performs his duties under the
lease. This awards a great deal of protection for the lessee because he is ensured of a legal
entitlement to enforce his undisturbed right of use and enjoyment over the property in
return for payment of rent.

It virtually constitutes an alienation of the land, but does not alter the character of the
rental to that of a purchase or payment of capital. The Long Term Lease can be bonded to
a financial institution to secure the payment of money.
At the end of the day, the 99 year lease is an ordinary lease agreement for a long duration,
creating rights and obligations for both the lessor and the lessee on the subject matter; the
occupation of the respective property in exchange for a set amount as rental.
Irrespective of its length it does not constitute ownership over the property. The lessor or
owner’s right of ownership is limited by such an arrangement, and in event that the owner
wishes to invoke his right the law accordingly awards him his due rights.

Typically land or improved building may be the subject of a long lease with or without a
renewal option. In the former, it will have some financial consequences in the long term
in the sense that the lessee or his/her assigns or successors in title will be required to pay
for renewing the lease after the expiry of the term. The latter of course would be of more
benefit to the lessee.

In the event that the purchaser (lessee) dies, we must consider two scenarios: a situation
where a will provides for a disposition of the lease, in which case rental payments would have to be continued and use and occupation would be secure for the beneficiary until
expiry of the term, upon which the beneficiary would elect to renew or not. The other is
when the obligations of the lessee under the contract are incapable of being performed
accordingly, in which the landlord would be entitled to keep the property including any
improvements made.

The Landlord effectively becomes the owner of the property and the tenant is simply
holder of an enforceable right against the “owner” for a period stipulated.
Renal payments may be made in a lump sum or may be periodic instalments. For a
commercial or residential property the issue of investment becomes a financial
calculation as to whether you can get a return over that period.
A long lease is a good investment if it is virtually long. For example, if a tenant leases the
property for a long time at a nominal rate, putting up a building or making improvements
may be a good decision, because he may amortise his costs and get his return over that
period.

Before termination of the contract, when the lessee commits breach of the contract, the
lessor would be effectively entitled to cancel the agreement. This will result to the lessee
losing out on the property ad any improvements made.
It must also be noted that the long lease is not ownership but rather a lesser title to
ownership. It is second best to title by ownership.