Re: What is a 99 year lease? - Posted by Brent_IL
Posted by Brent_IL on October 28, 2003 at 13:52:23:
99-year leases are used frequently with commercial properties. It gives the lessee time to spread out the cost of improvements while allowing the lessor to retain ownership. This is coming from the recesses of my memory, but I think that a lease for 100 years, or more, is considered a sale by the IRS. Don’t take my word for it.
As Hank said, the rule against perpetuities is a trip. The common law idea was that fee ownership consisted of a bundle of rights, and that the bundle should not be separated indefinitely. Condominium ownership spurred many states to modify their Rule against Perpetuities statutes, Illinois and Florida among them. The rule against perpetuities plays an important part in estate planning.
I once tried doing a SFH deal utilizing a 99-year lease. It wasn?t one of my better ideas. No one wanted to buy any kind of an interest in a residential lease. I guess people like the concept of passing on their property to their descendents. At the time, I didn?t have the resources to hold, so I sold the guy his lease back. Another expensive seminar.