By contrast, prepaid leasehold, also known as terminating leasehold, typically has a contract period of up to 150 years (more usually around 120 years). No rent is payable for the duration of the lease; as implied by the name, the rent is settled up-front. There is often a provision for negotiation around extension at 90 years and all capital gain during the term accrues to the lessee, not the lessor.
The contrast between these types of leasehold couldn't be more different. The prepaid leasehold is, in practical terms, the same as freehold: you have full rights to the property for a period so long that neither you, your children or grandchildren are ever likely to need worry about it.
It is typical of the 'very prime land' found on desirable waterfronts like Wellington and Auckland to be offered as prepaid leasehold. The land belongs to the council, and by extension the people of New Zealand, at termination theoretically reverts to the council.
There is abundant international precedent for prepaid leasehold; almost all land in Hong Kong is developed in this way. It is a common method of offering sensitive land for development in the United Kingdom and in the United States, including New York City.
In Wellington and in Auckland, where multiple developments are in progress, buyers have snapped up hundreds of millions of dollars of apartments.
They recognise the enduring value of prepaid leasehold; they also recognise that affording a prime waterfront apartment is both highly desirable and is made accessible owing, at least in part, to the prepaid leasehold structure.
And the people behind the purchases weren't born yesterday. They include some of the country's top businesspeople and most informed real estate investors.
In short, perhaps the only commonality between a prepaid leasehold and a ground rent leasehold is in the partially shared name.
They are as fundamentally different as a motorcycle and a Rolls-Royce: Both vehicles will provide transport, but beyond that, there's no real comparison.
